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INDUSTRIAL DEVELOPMENT

OF THE

NETHERLANDS INDIES

PETEF H. W. SITSEN

BULLETINS
of the

NETHERLANDS AND NETHERLANDS

INDIES COUNCIL

of the

INSTITUTE OF PACIFIC RELATIONS

1. Towards Economic Democracy in the Nether¬
lands Indies, by Dr. G. H. C. Hart

2. Industrial Development of the Netherlands
Indies, by Peter H. W. Sitsen

3. From Illiteracy to University, Educational
Development in the Netherlands Indies, by
Raden L. Djajadiningrat

INDUSTRIAL DEVELOPMENT
OF THE

NETHERLANDS INDIES

PETER H. W. SITSEN

Director of Industrial Division
Department of Economic Affairs
at Batavia

BULLETIN 2

OF THE NETHERLANDS AND NETHERLANDS INDIES
COUNCIL OF THE INSTITUTE OF PACIFIC RELATIONS

TABLE OF CONTENTS

General Introduction. 1

The Organic Structure of Secondary Industry. 14

Industrial Policy of the Government. 29

Factory Industry. 39

Conclusion. 49

Index of Tables. 63

Index . 64

CHAPTER I

INTRODUCTION

l'lom 1928 to 1939 the population of the Netherlands Indies increased
ii cibout 60,000,000 to 70,000,000. On the principal island, Java, the popu-
.iii reached a density of 1,360 persons per square mile of land under
llvution. The continuous problem of feeding all these people caused
1 1 anxiety. The difficulty was overcome partly by migration to uncul-
Ited lands available in the Outer Islands where agricultural settlements
|n established, and partly by irrigation, fertilization, and the distribu-
i of selected seeds, etc. It seems that so far as food is concerned
■. | -lete self-sufficiency has been reached for the time being. However,

11 nous efforts will be necessary to maintain this equilibrium in the
no.

The figures in Table I indicate that this fortunate condition was achieved
woen 1935 and 1939 at which time the demand for more industrial
H1 1 icts increased suddenly and sharply. As is well known from the
imy of the development of other lands, when the level of income is
inasing the demand for food products becomes to a great degree in-
mlic at the moment that self-sufficiency is reached. At the same moment
■ demand for commodities begins to expand. We need not go further
n the subject at this stage. It may be said that all indications of con-
nption in the Netherlands Indies make it clear that between 1935 and
I*l this point was reached. During these years we see an increasing
turn of secondary products going into the villages of the Javanese
nnlryside and to those of the Outer Islands. We see that gold, formerly
investment in the Indonesian world for the purpose of raising one's
iul standing, is parted with freely and used to provide the means of
ducing secondary products. We see an independent industry increas-
1 1 y develop from the existing mechanized industries which were
morly largely dependent on export trade, and from the traditional small
luge industries.

At the same time there was a remarkable expansion in inter-in It is clear that the people, formerly satisfied with a minimum of goods
communications while changes also took place in the monetary fie] ich they produced and bought only when absolutely necessary,

these years the growth of activity in the economic, financial, and
cational fields which had earlier occurred only among the Indonesian

dually demanded more and were therefore willing to exert themselves
re, although their requirements were still modest. A new spirit has

lectuals began to include larger groups of Indonesians as a result of 1 in born and its influence has become perceptible,
instruction and improved communications. As I see it, there was a tu
point in the social-economic life of the Netherlands Indies between
and 1939. The index figures in Table I below support this point of view

Table I

Index-figures: 1928 = 100

Years

1 .

2 .

6 .

Cost of living for worker's family with

stable standard of living.

Price level of food.

Income from native agriculture exports in

units of purchasing power (a) .

Total exports in units of purchasing power
Income from industry in units of pur-

7. Total imports in units of purchasing power

8. Consumption of primary foodstuffs in

9. Calorie value of this food.

10. Consumption of textiles in yards per

person .

Number of mechanically operated factories

11 .

12 .

1928

1932

1935

1939

100

106

110

118

100

56.5

100

51.5

43.5

44.5

100

165

210

335

100

61.5

100

102

105

112

100

110

100

136

100

132

134

162

100

125

139

164

(a) The purchasing power of the income for subsistence of a family with an income of about 360
per annum was taken as unit of purchasing power.

does not cover many years, is given below:

Table I A

Years

1936

1937

1939

Taxable wages, in millions of guilders. 493

Electric power used in industries (index).

Importation of capital goods (index). 100

541

100

144

620

128

144

he depression which brought suffering in more advanced countries
)ugh the resulting unemployment, was also the cause of trouble in
Netherlands Indies, as illustrated in Table I, because the standard of
g of the Indonesian population had been principally influenced until
n by the proceeds of the export trade. It may be said that agricultural
luction provided the Indonesian population with crops for their nourish-
it. while the proceeds from export-crops, cattle-breeding, fishing, mining
in recent years more and more from industry, commerce and pro¬
ions determine the available margin for raising the standard of
iare of large groups of the population above the subsistence level,
isidering that the great majority of the rural Indonesian population
o their own dwellings and land 1 , it is evident that with sufficient food
clothing, which is naturally simple because of the climate, an in-
ise in prosperity readily finds expression in the use of all sorts of
v articles. For example, in two industrial organizations in the small
ufjes of Japara and Pasoeroean in 1938 and 1940, respectively 285,000
370,000 guilders 1 worth of furniture was manufactured for the domestic
ket. The umbrella production in Tasikmalaja rose from 330,000 pieces
1934 to 1,800,000 in 1940. The consumption of bread and biscuits—as
nt from the basic diet of rice—grew by millions of kilograms; soap
ufactured for domestic use reached a volume of over 80,000,000 kilo-
ms in 1940. In nearly every desa 2 , no matter how small or how re-
<>ly situated, the use of flashlights has become general. For these, about
DUO batteries are manufactured daily in the Netherlands Indies. In

f ... , r years, some 18,000,000 yards of tussore cloth were imported annually

Other information of a similar nature, which, however, untortu * 1 _ . ,

wmer miuu mens clothes. At present one sees men everywhere m Java with

»i;g jackets. The importation of tussore has just about held its own,
in addition, there is now a home industry producing about 40,000,000

In a year.

I'lom these figures and from the index figures in Tables I and II, it is
« evident to what degree industry in the Netherlands Indies has profited

• I* housing situation in lava, whore two-thirds of the total population lives, can be estimated at
i i 1 iiio.OOO Htono dwellings, ti.000,000 dwellings with tiled roofs and 2,500,000 with other types of

i Iran (village* or hamlot), \n tin* runnllrmt unit of Indonesian society and consists of a group of
ini'H with thi’ii (irroiiipmiyhiy tmiityards and cultivated holds.

W1 II

from the increased buying power attained by the rural population,
increased prosperity, as I have shown, may be considered as the i
rocal action between the greater profit for the Indonesian from pri:
products on the one hand, and the growing desire of the populatio:
more goods on the other hand; this action has strongly promoted i
trialization.

It may also be seen from the index figures in Table I that
slight decrease in the value of total exports (line 6: from 100 to 97),
affected principally the European-owned estates, the income of the
nesian farmer increased (line 4) from 100 to 116. This increased pros
of the Indonesian farmer was not diverted to increased imports, but fav
the development of domestic industry, thus effecting a further inci
in prosperity. Here a very large role is played by the development
so-called Outer Islands. As an outcome of the establishment of agricu]
centers in formerly uncultivated areas 8 , of the ever increasing
the population in growing agricultural produce for export, of the dev
ment and organization of mining industries, etc., a flow of indui
articles found its way to the outer islands from densely populated Jav

oached a further stage : an ever better distribution of industry has
effected. In the Netherlands Indies we have not yet traveled so
lihough the future certainly appears to lie in that direction. The time
not be far when industrialization of certain districts of the Outer
ii 8 is begun.

order to define the place of industrial production in the whole
nic scheme, it is desirable to give a rough general idea of the total

sha: •

Table II

EXPORTS

OF INDUSTRIAL GOODS FROM

TO THE OUTER ISLANDS

JAVA

Year

1935 1936 1937

1938

1939

1940

Value in millions of guilders.

. 34 40.1 64.1

54.6

58.6

73.4

This development of the relations between densely populated lave
the Outer Islands parallels in miniature the development which
place between the eastern states on the one hand and the souther:
the western states of the United States on the other hand, during the
period of America's industrial expansion, about the middle of the
century. There also the chief products of the east were at first agricu]
while industrial commodities were bought from Europe. Then, a
agricultural development of the south and west gathered weight, the
developed its own industry and became the supplier of industrial pro
to those regions. Here the comparison ends. The United States at pr

3. This native migration shows the following results:
Years

Aiou cultivated by thorn in hectares
(1 hectare equals 2.471 acros).

1936

1937

1938

16,627

19,307

33,399

18,004

21,565

20,071

c l ion figures in the Netherlands Indies, as estimated during recent

Combining the domestic market prices with the statistically known
p iillural production, adding the value of slaughtered cattle, figuring
ilue of the fish catch, so far as known, and calculating the value
known exports of mining products, gives an idea of the value of
iltural and mining production of the so-called primary industry.
I lie data gathered in industrial statistics one can arrive at the amount
illh which is added to the national income through machine industry,
vor, we do not know the amount of earnings from commerce, pro-
ii or capital.

the basis of the census of 1930, the very rough test count held in
md of available industrial statistics, the following estimate of the
■ i of persons occupied in the professions may be considered fairly
ilo.

Table III

ut Occupation

Number Employed

Im iul production, cattle raising, fishing, forestry, etc. 14,000,000

ula industry

• industry
Industry .

secondary industry

2,500,000

300,000

600,000

Total . 17,400,000

M. m o, transportation, clerical work and piofoaslonn. 4,600,000

Grand total . 22,000,000

ninny to usago in many other atatiaticH, wointni aiu im Imltnl I*• .*'»n‘4 lit" agricultural work-

.. tlioir main sourco of income is dorlvmi limn miin iillm*.*• I• ■ ln«i»"ling. Iiom investiga-

i m 1940 and 1941 it appoara that there wan an nv.»i.i«j.. I ! wmlmi* pm lumily. The number
• >• HI agriculture, ii only men aro counted, can he an .unu-.nlinatoly 10,500,000.

• tound figures for production, ho fat on limy nu* known, indicate a
m ome in UNO of about 2,500,000,000 < j 111 1«I«o • i Im llm 17,400,000 work-
1 1 k 1 m Table IV Thin includes 450,000,000 guildum added to the

income from industry. The rest of the workers performed all sorts <
in commerce and gardening, the income of which is not known. I
is the income of the 4,600,000 workers in trades and professions 1
but it may be assumed that this group-as is true nearly all ov
world—was able to obtain a higher income per person than th
category of workers.

As is shown above, industry in the Netherlands Indies has a
become an important source of direct income. In addition to this
contribution to the national income, Netherlands Indies industry a
leased a not inconsiderable purchasing power, even with a rising
ard of living, by producing cheaper articles than those previously im
An illustration of this tendency is to be found in the decline of the
of woven sarongs. This article of clothing was formerly imported,
main part, but since 1935 has been manufactured in ever incr
quantities in the Indies, until in 1940 with a perceptibly increase
sumption, the domestic industry was able to supply the whole r
Until 1938 the sales price of the domestic and of the imported artic
practically identical, and the price fluctuated with the price index
ported sarongs. The competition of the two products, which do no
in quality, then became independent of the general index. Importei
(dining the last years with losses) to retain the market, but ver
imports dwindled to nothing. Graph A illustrates the story 4 .

The average price of woven sarongs in 1936 was about 35 guild
codi (20 pieces), while the annual consumption was 700,000 cod
cause of reduced prices resulting from domestic production and
sales by manufacturer to retailer, a consumer purchasing power oi
10,000,000 guilders was released on this article alone, besides that <
by the labor in that branch of production.

Domestic industry also brought important advantages for the
nesian population in another form. Although we have shown that i
than one way additional purchasing power became available
time between 1935 and 1939, there remained in the first place a :
demand among the native population for cheap consumer goods
an article as shoes, originally a commodity for the European colon
generally imported, has become an increasingly used article in th
nesian world dining the last ten years 5 . A domestic industry has dev
from this demand and an article suitable to the native market in (

4. Taken from the "Economiach Woekblad", May 1941.

5. Thi« in imperially important lrom a hygienic point of view. Hygienic propaganda has gre<
lated tin* urn* o! nhooN aince chance* of infection, •■pecially from hookworm diaoase, aro thus d

0 )

»0

and price is now manufactured in small and large industries. Graph I
a picture of the price trend of imported and domestic articles.

While imported footwear naturally followed the trend of the
price level for secondary products the domestic output followe<
of the domestic cost of living. This is a typical example of the v
which domestic industry decreases Indonesian sensitivity to world
for raw materials and to world commodity prices in western coi
upon which the Indies formerly depended exclusively.

The example of sarongs at once brings up the question as to w
the development of domestic industry will not have an unfav
influence on the volume of imports which can be roughly considei
maintaining a balance of trade with the exports of raw materials
subtracting the services rendered abroad. When the figures for
trade as given in Table V are examined, such a development
seem most unlikely, especially considering that in the period reprei
in that table total world production increased 43% and total world
increased 13%. It is probable that the collapse of world trade was c
by the substitution in the industrial countries of autarky for special
in products for which they are best fitted.

Table IV

MOVEMENT OF GOODS ON THE WORLD MARKET
(Percentages on the basis of value)

Imports of 1911-1913

a. Raw materials and foodstuffs into industrial countries from industrial countries 18

b. Manufactured goods into industrial countries from industrial countries. 12.3

I. Exchange of Goods between Industrial Countries. 30.3

c. Raw materials and foodstuffs into industrial countries from raw material

countries . 26.5

d. Manufactured goods into industrial countries from raw material countries. 1.5

e. Raw materials into raw material countries from industrial countries. 7.2

f. Manufactured goods into raw material countries from industrial countries. 21.3

II. Exchange of Goods between Industrial Countries and Raw Material Countries 56.5

g. Raw materials and foodstuffs into raw material countries from raw material

countries .:. 10.5

h. Manufactured goods into raw material countries from raw material countries 2.7

III. Exchange of Goods Among Raw Material Countries. 13.2

(a) Taken from a pamphlet by Dr. S. Korteweg at The Hague.

With one reservation a number of factors would seem to indical
in consequence of the industrial development of the Netherlands

GRAPH B

even more purchasing power becomes available for imports. The
vation I have in mind is that the industries in the Netherlands !
must be able to produce at a price level (which I call the Pacific
level) in harmony with the buying power of the Indonesian consu
This price level must be equal to or lower than the level of the co
which exports the cheapest goods to the Indies without dumping or e
aids. The reservation suggests that preferably only those articles s
be manufactured for which the raw materials are to be found
country itself or in which the labor factor is important. Thus it is prin
low-priced and relatively bulky goods which enjoy a certain
of natural protection in the island country. This situation will cor
for the time being because of the unfavorable freight relations bet
imports and exports.® These industries show sufficient profits so
further investments will be possible at an early stage.

One should give special attention to the fact that the advantag
such an industrial development far exceed the directly perceptible a
tages to the national income level. In the first place, the imm
increase in the national income level can be compared to the firs
which is formed when an object is dropped into a pool. This inf!
is felt in ever widening circles. The same is true when new seco:
industries are created in an agricultural country. The national in
obtained directly from industries, forms ever widening rings of pros;

It is certain that a good investment in Netherlands Indies
creates more purchasing power than the total value of proa
achieved by the investment, so that the value to be imported ini
country must become steadily greater, although the articles ac
imported may be of a different nature. This increase of imports into
cultural lands such as the Netherlands Indies is of primary impoi
for the future, and also for existing industrial countries. 6 7 Raisin
national income by industrialization and thus raising the purchasing
in agricultural countries, will do much to mitigate future unemplo;
in the whole world. In addition to a better rate of exchange for th
materials to be traded, a suitable industrialization of the raw m<
countries will place these countries in a position to buy ever-incr<
quantities of consumer and capital goods from the essentially ind
countries.

Statistical calculations demonstrate that in the years 1925 to

6. Compared to 12,000,000 tons of exportB, imports amounted to about 2,100,000 tons in
resulted in high shipping rates for imports to the Netherlands Indies.

7. Soo Table V.

mi|>lo, workers in industrial countries such as the United States and
Hiit<tin had incomes respectively of 1,368 and 1,069 '"international
•u irh per year, while workers in agrarian lands such as Finland,
my, and Poland earned only 380, 359 and 352 international units
inn I actively. 0 This suggests the likelihood that greater prosperity
.1. tmnly populated country cannot be achieved without industrial
• • 1 ’immt. This is corroborated by other evidence; the worker's income
United States showed a steady rise from 1850 to 1925. Income in
Mlinital units increased from 582 in 1850, 813 in 1880, 1161 in 1900 to
1925. 10 And it becomes evident that industry is the lever to greater
iiy when the incomes earned in primary and secondary production
.. countries are compared. 11

Table V

PURCHASING POWER OF AVERAGE INCOMES PER HEAD
(International units)

Primary Secondary

Country Production Production

U.8.A. 1935 . 688 1728

Grant Britain 1930. 827 1151

I’mnco 1930 . 500 1373

lupnn 1934 .,. 146 959

Jlwodon 1930 . 278 1109

mum ii Izing the material presented above with regard to the Nether-
lmlif»* # one may assume that some time between 1935 and 1939 the
• imiched a stage of self-sufficiency for foodstuffs, and through
mii.i 1 purchasing power, attained because the Indonesian population
n 11 uli ud a larger share in the proceeds from the exportation of
»liuinl products, the demand for secondary products was strongly
I* 1 1ml Thus, conditions were favorable for a rapid development of
ilmy industry.

i ni*l advantage of this achievement, a rapid economic advance
I In>ie seems reason to expect that the trend in industrial develop-

1941

luint national unit" is tho average purchasing power in the U. S. A. for primary necessities

•.I $1.00 between 1925 and 1934. By a simple comparison of the money values of wages,

i . .. etc. in certain countries with those In less developed countries, a helpful, though un-

U •'"inrmcito, idea in obtained. Thun, Claik In his Conditions of Progress (Macmillan—1940) has

* i ilull tho rupee in British India hnn an actual iiuichanlng power ratio of about 3 rupees to 1

' • while tne exchange rate was 13.4 rupnnn t<> I jimiml Mm ling. For Japan ho figured the pur-

i • ui.. at one yon an 14.1 pencil. Hough calrulatlnmi lot lh*« Nnthmlands Indies show that the
•‘••i i"'Wo ol oiio guilder In lh»< I ml inn f r >i |<um pi<"lm • >. load, clothing, fuel, light and other com-
>» oliout equal la that of $2.00 in the United Stains (Pages 3!i 30.)

1 -i< filt., pages 4n 41

id 1111111 facing pago I4H

• t |mye 142.

ment, the growth of which is evident from Tables I and II, can be A/1 mu one considers that this investment represents about 550 guilders 12

tained in the future.

w mlcing man, a figure which may be compared to about $4,500. in
In consequence of the war various vested interests such as inter! Hulled States, it is clear that in order to reach greater prosperity in

I J*'lhorlands Indies, considerable sums of money still have to be
i*’(I The figures mentioned also explain how it happens that behind
» worker in the Netherlands Indies there is an average of only 1.8
• power available to provide for his needs, while for each American
I here is available an average of about 40 horsepower.

shipping, railway communications, etc. which had slowed dow
economic development have disappeared so that in the future it v
easier than before to replace obsolete organizations by those whi(
more suitable to the economic life of the Netherlands Indies. It is
worthy that the same decade which was marked by the upward
in the line of economic development, showed an equally important t
point in the social organization of the country. There was an impr
expansion of education, coupled with the transfer of its managem
autonomous councils, mostly with Indonesian majorities in control, tr
of public health services to the same social-political institutions, fon
of producers 1 unions for obtaining better distribution of income
who collaborate in production, with here and there spontaneously
ized social provisions for the workmen; there were savings in the
nesian community, which have been invested in productive ve
instead of in sterile gold, etc.

This all seems conclusive evidence that in these years forces
grown in the Netherlands Indies which will carry the land mor
more rapidly to greater freedom and prosperity,

For the students of Far Eastern economics, let me round off this
duction with the results of a calculation of the capital invested
Netherlands Indies. Naturally these figures must be considered al
rough estimates since the statistical data in the Netherlands East
are insufficient for an exact calculation. In many writings, howeve
mates are found which summarize the interest and dividend infor
and thus give the so-called commercial capital. The large sums in
in irrigation works, highways and bridges, dwellings and harbor
etc. are not included. In my calculations, since this is the intern
usage, land values and national debts have not been included. The
were as follows:

Table VI

Million gu

Buildings . t- 200

Communications . 1,55Q

Commercial capital . 5,400

Government enterprise . 1,600

Balance not included in previous headings. 40(]

TOTAL . KUSO

(a) Of this amount, 900 million was Indonesian capital.

•— Iliu guildoi cannot I »•» lopionuntod (simply at itn into of exchange.

CHAPTER II

THE ORGANIC STRUCTURE OF SECONDARY INDUSTRY

For practical purposes the industrial field in the Netherlands
can be divided into three main categories: _ . . , , .

Cottage industry (m Dutch, huisvhjt ): the production of commoditi . y 3

agricultural workers m their spare time 1 by the use of hand tool?"
by which they add to their incomes.

Small scale industry (kleinnijverheid): handicraft and workshop!
less than, say, 50 workers, principally working with hand tools an<
no important mechanical aids.

Factory industry (fabrieksnijverheid): all further secondary prod
with mechanical aids or with more than fifty laborers. Factory prod
only includes those factories which are to a certain degree indepi

an agricultural estate are considered as primary production in the h
lands Indies.

This division is thus affected principally along technical lines
the basis used in the industrial statistics set up in the Netherlands
in 1939. Nevertheless, these forms correspond closely, although not
lutely, with the social structure.

In the first place, cottage industry is practically entirely in the
of the Indonesian farmer. The goods are produced, for the greates
within the family circle. The major part of the production is trad
members of the family in their own village; another part is bou<
by buyers and sold in wider circles, or even in some cases expoi
often happens that the raw materials are provided by a middlemc
which case the finished article is delivered for payment of wages f
work.

. .. mm y named by the people in this branch of industry ia qmi«

..1'* 1 ’ An examination of the budgets of 5,000,000 farmers in On

I M ,, nliuwn I hat, from cottage industry, trade in these product* and
h "," cultivation in their own gardens of the raw material!; »m..l
|m ,! ""l “I industry, an average of 17% accrues to the budget.-'*

• • "n! Investigation shows that this percentage has, in general, linmi

• i« 1111 «mI Analyses of budgets, which have been published extensively

• • ni year*, make it evident that about 10% of this 17% comen Jiom

"" of cottage industry. On these grounds, the addition to th«

■ •••I income from this industry may be estimated to be about 110,000,01)1)

• a Production analyses have shown that about 20,000,000 guilder
I materials for use in this branch of industry are imported each

cottage industiy. Timm

. ..y instances of cottage industry combining and collaboiatimi

Minall scale industry and sometimes even with factory industiy. Tim.

. .*Hon often developed new structures in cottage and small *ccil«’

•i'V which had certain advantages but which were often socially

.cunlcally fatal as administered by the bakuls since the luiluil

din m tod the work only wished to keep control of the whole situation
Im " wn profit. Thus, in the textile industry, to maintain his key po*l

1 xx x , . x v. -L , 1 would introduce inefficient methods of winding thread, to piovcmt

units. Sugar refineries, tea and coffee factories, etc., which form p ,

. ^ A A __._from dealing with any other entrepreneurs. In Middin lava

1. A work analysis of rice cultivation shows that 65 men and 44 women working 4 hours a
cultivate 2.5 acres of rice-fields in one day. Thus there is a great deal of spare time available. Th«
ownership per farmer is 1.6 acres.

2. In Indonesian: bakul and tongkulak.

.. especially imported in a form not suited to tho loom* humq

weavers could only buy yarns in a form they could us-
d' 1 ' I'.ilculs who rewound the imported hanks. In this way he rotalm-d

.I ’"ly of the trade and credits of the weavers altlioucjh yum

i-uvu been imported in usable form. On tho othoi hand, tluv.u
had the advantage of teaching the people that by division <>l

. 1 collaboration there were possibilities of increased olllt ioncy

.. way as on the assembly line in a modern factory. Thu lot

• I oMimple demonstrates this combining and cooperating:

"" lllllo villages grouped around Soekaboemi, a small town in W.-mI
"limited in a prosperous agricultural district, a fuiily hupoilunt
r industry existed, making agricultural implements for local im.»
'••is, a small-scale industry dovolopod which extended Its |.iodin-

... by making all kinds of cutlery. Here the hammering out ..I

••ii . was done in small-scale industrial shops with from loin lu

. 1 Invontlyallon (Mil Uni mil l.y lld.l<lcm| {'dolnmols In Ifiu 1

I I If*

ten workmen, while the handles, made from horn, bono, wood or toij
shell, were made in the sphere of cottage industry.

The knives were subsequently assembled in the shops and wertJ
locally. The product could not be compared in quality to that which
being imported from England, Belgium and Germany. However, onl
more prosperous could afford to buy the better, imported article.

Then through instruction and education consumers desired
workmanship. Growing incomes stimulated this demand and this ei
aged the workers in small-scale industry to greater efforts. A numl
small-scale shops negotiated for closer cooperation and within a c
of years they organized some 1,200 workers into a so-called indt
central or cooperative. 4

This industrial central built a finishing plant for the joint accoi
its members, in which the most skilled workers from various small
workshops were brought together and where, also for their joint ac<
polishing machines, boring machines, tempering furnaces, equipme
nickel and chromium-plating, etc. were installed. The workshops
were cooperating with the industrial central pledged themselves to br
every week a specified amount of work, such as blades, with the he
made in cottage industry. These semi-finished products were made fro]
terials and models furnished by the central; they were delivered to th
tral for a reasonable price, jointly decided upon by the members.

At the time of delivery to the central the objects were inspected for
ity and form. Badly made pieces were handed back to the shops for im]
ment, the approved ones finished and assembled, then packed and s
dealers. It was an accepted principle that profits should be shared a
the workshops according to the quantity of goods they had delivered,
the elected management of the central exercises a certain authority in
ing the uses to which the money shall be put. In principle, it was agree
part of the profits was to be spent on better tools for improving the affi
small-scale shops.

Thus we see the development of a form of industry by which the In
sians have established a business as complex as that of a big facto;
combining the cottage, the small-scale and factory industries.

This example introduces the second form of secondary industry, i.e.
scale industry. In this branch there are many and varied centrals
nature described above. There is the weaving industry, where wi;

4. It is noteworthy that in the same period also agricultural centrals were created: tapioca
vegetable oil centrals, etc.

i WMi.liinq and Hewing lalco place in cottago Industry, whilo shearing
*n..| urn done m small scale or factory industry. In the batik in-
•“•..im stages of preparations are allocated to cottage industry. In
"""• • i "luiili y, the manufacturing of the composite parts is given to
.d .hops by the main factory, while the finishing and the sales

• • tIn«>tt<|li the centrals. In the pottery industry the molding and

d.. small-scale industry, and the glazing, packing and shipping

»hi..n.|h tlm central.

“» of small-scale industry resulting from this system has been
h*. This is especially to be ascribed to the form which is com-
Muii.ihln to the mentality and nature of the population. A little ex-
*m»m <■ neia 1 economic territory will call attention to two important

..which undoubtedly have influenced the growth and form of

f • ‘ i " « lolly small-scale industry. First is the sense of obligation to
duo/ o \'.t:;tance, a conception which has penetrated Indonesian com¬
bi" 'iud by which every communal relationship, whether to society

• * i individuals is determined. The second phenomenon relates to the

•• • in mm os of slack periods in the cycle of consumption which has
... and two peaks each year closely connected with the harvest

ill

i mm II.. I mi vest is sold and the farmer has money in his pocket is the
•' !•'. I • 11 y m new clothes and tools. It is the period of courtship and mar-
Mnd llim of festivities with purchase of delicacies and the organization
"l .Hid dances.

* nUh,«ilion to give assistance, called sambatan or sambat-sinambat

♦ •’lulling to the community and toeloeng menoeloeng when referring

villagers has had a very favorable influence on the results of the
indiiiiiiic.il centrals. So long as the cottage and small-scale industries

..luring only for the needs of their own communities the ingrained

i • •! obligation to be helpful to that community and to its members
d il" bost quality possible to be delivered and insured that the re-
diclos were ready on time. Later, when buyers outside the village
i "mImis the situation changed and it was often very difficult to get

• i. u on time. Anyone who was ordering such goods about fifteen or
V"<iia ago knows the usual outcome. Never on time, not what one had

d | »oor form and finish, poor materials, etc.—these were the things for
iIh. Indonesian craftsman was reproached. Only the shrewd bakuls

• im mi) were able to obtain a certain position in this village production

♦ I mg umple credit or advances in times when the workers could best

use money. The result of this was that intolerable social conditions! <m work from its stocks, it can maintain an even level of produc-

existed which have disappeared with the growth of the centrals. The I.i «!»•■ whole year and in this way keep production costs at a fixed

lishment of the centrals which were often directed by an Indonesian If n -v..., when the product is perishable, e.g. cigarettes or biscuits,

craft teacher 5 and the best educated of village craftsmen - men! .. H .pendent on the vagaries of fashion, e.g. striped sarongs,

sometimes went to the city, read the newspapers, in short, people 4 .the machine industry is often unable to hold its own against

vision was extended beyond the boundaries of the village-removed I.. from Indonesian hand production in the face of very great

of the other social and technical shortcomings. The small-scale wol .1 I lu.t nations in consumption and sales possibilities.

united in a central, realized that they had assumed an obligation towel .. 1 .1 v, (from December to April a monthly average of not more than

finishing plant. They have begun to see this finishing industry as a 4 " •<> four million meters of batik goods is sold while from June to

their community and therefore they feel obliged to do good work andi ' . . Urn. average is between twelve million and fourteen million

early deliveries. The following little episode will explain the new sel .. of all sorts of necessities except primary essentials more or

obligation better than many statements. I 11 . »ame. trend. Consequently, the industries which are obliged

Once when I visited one of the central smithies, the master blacS ,• 11 m u work according to this seasonal fluctuation have often

with much pride exhibited his tools: new files, a drill, an anvil, etc. Bil 1 r «’'-lal systems. The machine weaving industry is a typical ex¬

still more pleasure he showed me his beautiful, shiny gasoline lamps! ' 1 liml thoso factories produced only woven sarongs, multicolored in
he had hung in the smithy "to be able to work by night too." NatuA. 1 potentially a very profitable article. But this article is strongly
told him they were beautiful, they were, in fact, but I expressed surpril.in. color and design by fashion and can be made by competitors

he was going to take on night work, a surprise which is understandable! ..Inna and hand looms. With the development of the latter a

I explain that in this industry one seldom works more than an average* .... .. between the machine and hand loom business in which the

to seven hours a day. He hastened to assure me that they were certaiJ.. certainly have lost out had it not taken up plain fabrics in

going to work every night, but he said, "You know that we have to |. ..ml., it again possible to compete. Through this change in their pro-

many celebrations in the village, for the harvest, for births, marl , • ... they were able to meet market demands and keep their

deaths, etc. Because of this we often lose much time. It might hapl I .1 plain weaving during each slump, since this naturally did

there were many such festivities, our production would become so! 1 ■ lb" influence of fashion trends.

that our finishing factory would have no work. We can't let them do*, ..| industry is often also influenced by the same circumstances,

in such cases," he said with a sigh, "we shall have to endure suchl, .. I acture of a certain type of hand-wrapped cigarettes. Instead

work." This statement proved to me that he considered the finishing a , those cigarettes are wrapped in the thin leaf of corn which

communal possession, even though it was situated in another villagi .| || 10 corn stalk, while their filling consists of tobacco mixed

sambatan obligation was the binding element in this case. It was ia .1 which finely ground cloves is the main ingredient. These

regaining of lost income which regulated his conduct, but the obligal.... .xlremely popular with the native population, both for their

the community to which he belonged. I.I flavor and for the crackling noise made by the clove grains as

The second influence, the influence of the rise and fall in consump*. . 1 ...... I lie heat and free their aromatic oils. Their cost is about

small-scale industry, is of an entirely different nature. It is of vital impel .. -n I.

in those forms of production which emanate from mechanically orgl . ,1 ,|.production in this industry amounted to about 19,000,000
ventures with fairly high fixed overhead costs, and those under Indol PI4II. Ilowcvor, in the periods of slump not more than 1,000,000
control with very low fixed costs. When the former is obliged to linl wore sold por month, while* the domand increased by about

duction, the production costs per unit rise very steeply; when the lattea .,, mnnlhn of prosperity. Thou© eupnoUon cannot be kept for more
production, however, such a rise does not occur. If a mechanically orgl . , ■!< fl without dolor ioratincp

- I i ilil then© wore G9 factories producing then© cigarettes, employing

5 . For further dotailw on Iheao toachora noo Chapter III.

new production. In 1930 lb, „ ere ^94 0M Ch' eSPSCi ° lly
industrial workers or 4 7% T n ~ * 94 '°°° Clunese amon g ‘he 2,21

=..« , h p s“c,o“r ht, r on trr 9M “° iiy

careless production, neglect of time Iimlte, etc. ° W Phe ”°

succeeded in obt^gZZtT^lmall Ihop! 1^' Q

there were repeated demrrnHa f ©ople s Council (Volk;

■or to those 2SS^^T?T “ C ° n ' r01 ■*“>

SS?=iS

sr s*: r ”- smo11 ;x:

~f^t=o“o^r b ^r

age ,her,r;tir y sn,a “ factories were run ** ^

Imd insufficient knowledge of the trade had to sell out to the highest
lift Among Indonesians there were not enough capable interested par-
A llliough the Chinese were not seriously interested in industrial develop-
(•* 111 '(finally, there were many who now became interested.

I\n investigation made in one of the most important weaving centers,
<l|Hluja, a village near Bandoeng showed that about 335 of the total of
iciimately 1,500 large and small businesses passed from Indonesian to
■m mu hands in 1939. In 1940 this number was 35. This is a clear indication
I wn have here a case of economic readjustment. As soon as they realized
' dim field of enterprise did not suit them the less capable producers sold
" i n lories. When there were no Indonesian purchasers these sales were
I* lo Chinese. These transfers were therefore due to special circum-
*' an d consequently it was not a question of racial penetration. On the
" l ,nn< i an opposite movement occurred in many of the older industries
llif mime period. In Djokjakarta and Solo the Chinese batik producers were
l nil pushed out by the Indonesian contractors as in Pekalongan also. 7
"ii.|uestionably the Chinese dealer has always had an important place

..11 scale industry. For this there are historical reasons. At an earlier

I Ihe occupation of merchant was definitely not valued in Javanese
film In the closely woven village relationships the merchant had no place,

H llii' Javanese intellectual considered trade as an inferior activity.

• I'lnlosophy of the Indonesians made it easy for the Chinese to take a
i important place in the Indonesian economic world. They became the
|*iii of products as well as the distributors and collectors for the European
li "im. They also filled the role of distributor for the importer. About 20

. .. ‘bis business was practically entirely in Chinese hands. But in the

. 7 ears great changes have taken place. More and more the Indo-

"i is reserving certain parts of commercial service for himself and

. I ou * ‘be Chinese from them. This is also true in the case of secondary

I.'y- As a typical example I mention the fact that the batik industry

i 1 ’ 1 U P nearly all the textile raw materials through the Chinese middle-
llowever, when the batik centrals were organized, the Indonesian
' "i"'-’*, buying large quantities as the Chinese did, made agreements
Hy with the importers, often for prices specified in advance by the pur-
h Y a sort of first refusal contract. Thus they obtained a considerable
*■' ilmi in the cost of the final product and proved in their negotiations to
" ''lear understanding of modern business.

i i •'•member that a few years ago one of the directors of the Indonesian

in Ml r,0% ill Ilia wlioln I,"Ilk Imlimlry In ooncnnlralail In D|ok|akarta, Solo, nml Paknlnngnn.

batik central in Solo" told m „ chin.*, ^ estabUs

which were nearly alwayt. auxiliary to the main business of being n
men, had decided to close down. It in noteworthy that he had promi
uy larger quantities of native auxilia.y material such as charcoc
peanut oil from these former business rivals and to give them prefi
for the local distribution of batik. "You see," he said to me, "these
have worked in our line for dozens of years; formerly they gave credl
help m difficult times to many of our men who had small businesses 5
sure, sometimes they also competed unfairly with us, but still, to a c«
extent they belong on our side. Now that we have grown strong throuc
cooperation, and they have not been able to keep their business goi
competition with us, we feel obliged to support them in their trade." H
a broader connechon-a connection which the intelligent director of th<
central understood-was an expression of the modernized sambatan i
is typical that the capitalistically minded buyer of small weaving fa,
considers he has fully carried out his obligations by the payment
agreed sum of money, while this Indonesian director feels it as an
ion, when any action on his part causes changes in the life of th
mumty, to take the consequences upon himself, or to mitigate them. A1
will certainly not say that every Indonesian intellectual is as imbu<
the spirit of the sambatan obligation as this director was, it is a fact ft
relation between employer and employee in Indonesian organizati,
different from that found in the majority of Chinese and European ind,
enever great profits are made in a European business, the manag
comparatively generous shares of it. even greater shares go to the
or stockholders and m general the workers are but modestly compe
much more flexible arrangement exists in Indonesian business co:
because of the sambatan. Wages, as well as the size and kind of gif
the contractor to his workers at the time of the annual celebrations, wee
., rise an fall much more elastically in general, according to Indo:
business conditions. Since the Indonesian considers this system to b<
just_ there are seldom difficulties with the workers in Indonesian ente]
The extent of small-scale industry can best be measured by the ni
of persons employed. Of the estimated total of about 2,800,000 work
secondary industry, there are about 2,500,000 in small-scale indusi
whom about 2,400,000 are Indonesians. The other workers are most!
nese. mong the 2,400,000 Indonesian workers, according to an es
made in 1939 from a very incomplete test count, there are about 6

blneci 'urnovor ol abouMO 0 ^ 1941 of 289 balik MlnblUhiM.nl. whirl, had]

ion workers. The majority of these worked in small shops, either built
in the home of the owner of the business, or built on his land. An incom-
and rather general investigation made in 1937 indicates that probably
lo 45% of the total number of workers lived in villages. Beside these,
a, is a group called bakul-workers, probably about 40% of the total, who
I their products either wholly or principally to middlemen, while 15 to
work in hand operated factories with less than 50 workmen. These
L named concerns often also buy up the products of the bakul-workers.
|* uxjards the types of production, the following table gives data from the
Lius of 1930 and from the general investigation of 1937.

Table VII

PERCENTAGE OF WORKERS IN SMALL-SCALE INDUSTRY

i* »t of Industry

Village

Production

Bakul

Workers

clothing, leather . ^1.5

ui ind table luxuries . 48,5

_ 3

pM-ilwork ...

. 3

Factory

Workers

» -llunoous
I fnlal .

100

I 1 inly the factory workers can be considered as actual wage earners,
11 ,ill, all the other workers may be considered principally as share-holders
k II... business, both with respect to the means of production and to the
PH. modifies manufactured. Both among the middlemen and among the
of the hand operated plants there are Javanese and Chinese foremen

IlMIB

__ _ L1C1C UXC juvuux^civ --

K,, cire completely capitalistic in outlook. Unfortunately data about the
i»<l«>rtion between the number of businesses conducted and owned by
Li- tiosians and by Chinese are not available.

Ihn middleman, generally called bakul, more profit- than community-
has repeatedly taken advantage of the opposite mentality of the
pitiimKian producer. Such cases arouse serious dissatisfaction in Indonesian
|}Mlur:tual circles. The most extreme complications and machinations which
■»*« cmd in which the Indonesian workers came off very badly, sometimes
Kthictd insoluble. The following diagram, illustrating the complexity of
Em... i olationships, applies specifically to the situation encountered in the
u...|o textile industry in Central Java, where a thorough investigation was
Hh.I.. hi 1936.

DIAGRAM OFTHI < III IA< I II

XIII I INDU/rp

CON/UMER

via baz^arI

/mall

f*J A Jla a

BAKU L/

BAKU!/

BAKU1/I

PEV/INDf R/

V/HOLE/ALER

IMPORTER/OF yARN>AND D/E/TUFF/

HONEy ADVANCE/'
YARN /

•- FfNIZ-HED PRODUCT

As may be seen from the above, the bakuls placed themselves between
pw materials—via the cottage industry-and consumer. They knew how to
Lin a powerful position by offering advances in credit, and especially
i* uplifting up the work. I call special attention to the latter because t e
pitlustrial centrals also followed this system of dividing up work, but with
Lllo other intentions. The bakuls operated with the plan of keeping t e
tinkers dependent on them to increase their own earnings to the limit at
1, expense of the workers. The centrals on the other hand operate in order
K maintain the quality of the work, and to improve the social-economic
►mltion of the workers and of the village. In the latter system, the earnings
La the industry were shared as evenly as possible; in the former there
a very uneven distribution of earnings. The previously mentioned in¬
stigation in 1936 in Central Java and an investigation made at the same

..into the abuses in the furniture industry in Eastern Java, demonstrated

| Ml not less than 70% and 50% respectively of the earned mcome-i.e.
|*.K| 0 S plus profits-went to the bakuls as pay for their management. That
Luc shrewd fellows were able to accomplish this, and that the popula-
Li accepted the situation, must be ascribed to the social position occupied
u the bakul in rural districts. In general they are the most advanced, they
*„.w the outside world-but in addition, they know every characteristic o
village; for the building of new homes, at weddings, births and funerals,
L hakul is ready with advice and help (the latter especially in the form of
ELy advances to be paid off later in delivered products), to stand by the
nkers dependent on him. He can do this without too great a risk because
L knows the people thoroughly. It is remarkable that in the modern relation¬
's of the industrial central these same good qualities of the bakul are also
■Itlzed. The workers in the central always have a credit account m the
■lulling business, against which they may draw in exceptional circum-
»■ inces. The setup of the management and the workers in the finishing fac-
hy, who both come from the cottage and small-scale industry, guarantees
Ik very necessary knowledge of details concerning the personnel. I am

.ioughly convinced that this form- which has developed in the last six or

(, v «n years as a result of the growth of education and travel facilities-will
Ly an important role in the future of the industrial development of the
•iHilmrlands Indies.

In order to round out the picture of small-scale industry, I may add some
i..i,ills concerning the working day and wages. From the data (Publication
in nl the N. E. I. Office of Labor, 1935) gathered from 1931 to 1935 on con-
,ltli, ms in the hand-operated cigarette industry, which was then entirely, and

I • "I i

that in Central JuX’I'Xun ."'j’ ,,lfl « may b

23,170 in mctnufactuxinq it,Utmi.v , i "" I 11 ’ <>y< ' d ln cotta g e industi

13.420 , especlivcly A 1 .. <••«. 'he figures are 6.71

average of „o, more mT* . “**** W °‘ h

was very prevalent in .. ' " " yoar ' Absenteeism fro:

300 small weaving establ,. l„ " "" An investigation undertd

ter of Madjalaja on Javi^ uhowilTi] ' V "i '“''v'ously mentioned weavim

The following may be said r,<r , " 0 ' more than 6.4 hours a

as they are controlled by bakuhTthe 9 In co «age industries, L

relationship to the bakul gives a loaica| WCU, i , ; ' UnbeIievabI y smal

call the pay a wage. In fact it is m -''T UMClllon for this - °ne can hj
Although the wages are also W X" ^ T" *"*”**“• «
tion with the centrals thev rm= k . cottage industry is in coi

in farming. In ^ With "hat may be ,

tom oTm ' he di "“ em d ~es of J2y better. »,

m Arming districts where there 1 J ° g ® S ° r sma11 to ™s, in other

The new forms which wX f t6nds to ^*1

tries justify our expectation that a new ? ^ ^ yearS in these f*

East Indies, with much £eate enZsZ 7 ** Neth ^

insight.ro 5 enthusiasm for work and with econo*

with more than S^rk^has 1 ^ 11811 ^^ 0101168 ° r non - m echanized p|„,
of industry which iaU^Z ^ 9 " atty - In 1939 -any brc^J
‘he Netherlands Indies ^maia^ 9 X

‘hey are not finishing plants workina SetUP . ° f these facto:

industry, are practically entirely we^ C ° 0peratlon With small-scale a
ferentiation of forms, so tvni^i L -JlT' Ca P ltaUstic in organizatio:

Lm they are cheapest; the sale is to the highest bidder. The extent of the
Modes is extremely varied. The number of workers per factory varies
jlwron twenty and 4000 or 5000.

Tho development of this type of industry also demonstrates the turn-
| point in economic expansion between 1935 and 1939. Secondary
(luslry until then always originated as servant to agricultural industry,
i normal consumer goods for the worker were at that time imported
I-induced by handicraft. As soon as agriculture became mechanical, 11
I jfopair shops came into existence. At a time when exports of agri-
n < il products to other parts of the world were growing, dry-docks and
|l*yards became necessary. Slowly a tool industry developed, supplying
Culture, shipping and handicraft. Following this, the workers' needs
• nnsumer goods grew so fast that they could no longer be supplied
handicraft; the volume of demands had then grown so large that it
I^Hiue profitable to fill them from local mechanized production. It should
are noted that this point appears to have been reached in the Netherlands

i T VQried/rUnfi l ton about 1935. Within about five years, the number of workers in

I'uy industry was tripled; next to the old established ventures such as
ibly-industries, ship-yards, etc., there was a large expansion of the
modify industry; the number of electric power-stations grew from 299
i Ml; the number of large weaving mills grew from 9 to 67, and about
1 »lher factories were established.

i'wo forms of industrial development which were to become important
the Netherlands Indies came into existence at this time: the overseas
!•»!/ and the managing agency.

I'he first, a factory set up as a subsidiary or built on the experience of
iilur factories in highly industrialized countries, is of great importance
(liture development. The Goodyear tire factory, the Lever and van den
ill’s margarine and soap factories; the great paper mills, the General

new industries, whfl|

dence; the structure fesimpleMht indUStry ' iS not much 4

- of

■hinm plant, the breweries, the Bata shoe factories, several large weaving
pi - pinning mills are typical examples. These are in general large fac-
Bina, set up in the Indies with capital and management from a distant,
■iMy industrialized country, and to which new ideas are constantly
pHiinq from the mother factory in the land of origin—ideas which embody
ft i *’Suits of research, or which are brought by new personnel when the
■ •"»y is expanded or when there are replacements. This setup appears

L •• In Iho Netherlands Indios the sugar industry with its extensive mechanical refineries greatly
^ " • -I Iho establishment of assembly industries. When the sugar industry was reduced to half its

nlzn in 1932, tho Government had to take stops to prevent the simultaneous collapse of those
Hu* h.ii y Industries,

to be very efficient and attractive for backward countries. In these
tries real scientific and technological knowledge is expensive. Peopl
the required education are comparatively few in number. In the mol!
country well organized and well run research institutions are genefl
available, as well as large groups of experienced engineers. The airph
has brought the world closer together; thus close contact with the motli*
land can be maintained. This is the best form of "white man's Joi
provided there is no exploitation of the worker and endeavors are me
to pass on to the Indonesians as much experience and knowledge s|
possible.

The other development, the managing agency, does not impress ^
so favorably, especially in the form in which it has grown up in the IndU
during the last five years. When factories came into existence, furnisjjh
many commodities which had formerly been imported, the importeri
these goods became to a certain extent superfluous. Since the impafc
was generally also the wholesale dealer and thus in possession of a
organized distribution system, it was logical that the manufacturers,
in the beginning had enough worries, gladly turned over the sale of
articles to a middleman, i. e. in this case the former importer. Sin
import business often was at the same time a department store, it
in many cases a very efficient plan. This cooperation, which wi
tainly not fundamentally unacceptable, reached a point, however, w
many industries were tempted to too rapid expansion, for which |
obtained financial facilities from the importers. These importers therWj
acquired the exclusive rights for the furnishing of machinery and fft
materials, as well as for the sale of the products. The importer becdH
the managing agent for the factory. This arrangement has in some con*
led to complete subordination of the manufacturer to the import*!*
situation which is certainly not conducive to a healthy development j|
industry.

Statistics have been assembled since 1939 in the Indies for a numljl
of branches of factory industry. In these branches of industry there wf)
5,469 factories with 324,210 workers in 1940. The distribution of factort*
to cover the whole field of commodities, and the stage of developmi)
already reached, are most important. But before passing on to this, I nliM-
first survey the methods by which the very rapid industrial expansion
the last years has been directed and advanced.

CHAPTER HI

industrial policy of the government

In every economic devdopmer^ clearly

, pace. The following table, which refers to tne u

Wonstrates this trend.

Table VIII (a)

htiq.. mining and J
Llltuce, excl. rents..

MAI. ...
| units ,

Occupied

Millions

Same, less

unemployed

INCOME

Dollars per

Billions person engaged

of dollars m industry

Income I.U.
per person
in work
on 48 hour
week basis

4.97
,. 1.35

1.38

4.97

1.20

1.23

0.765

0.457

0.992

154

381

807

298

737

1561

.. ~Z

7.39

2.214

2.385

299

323

579

625

■ i fonts. .

ki.

^L|1 culture .. -igoc

. mining and building. u ad

Hjiuitco, excl. rents.

IthTAI .

Hfc) fonts.

||«IL

A-.. Culture ...

mining and building.,
excl. rents.

MM.••••■

I It.> I ..

‘lift!

. 6.90

6.90

2.72

2.80

1.78

1 7^

259

643

354

878

mining and building.

2.92

3.10

l./U

3.19

1139

1558

ml Mice, excl. IfcJma .

12.42

6.72

7.18

540

576

739

787

HKin

.. 10.70

10.7

7.6

8.7

3.69

t 71

345

752

624

1361

| ||i titiii , mining and building....

.. 8.45

.. 9.92

8.56

984

1780

■lllltfCO, eXCI. ..

27.0

17.96

19.36

665

716

1203

1293

11.1

13.0

15.6

9.0

22.1

36.9

810

1701

2366

625

1313

1828

39.7

68.0

72.4

1712

1822

1322

1406

10.5

11.9

19.95

4.70

13.4

3.9

448

1127

1599

669

1683

2390

41.35

50.0

53.0

1210

1282

1809

1917

, n„,k: Tim CondlHo»« .. Proqfn. l>ug»

340.

worker derived fern^ ^ deVd ° Pm,mt «» i-com,

Pa,tera - The increased industry itsel, M

^ prod -

«*ur s yeora ■-

Table IX

...^ (From % up es in Table VIII)

Year ME W WTERNATIONAL UNITS (Billions)

CS"*—. »» *»

1,48 2 - 4 5 6.70

r—uiy production

Total* 6 secondary p^uctionl”!;;;;;;;;;;;;;*’

0.88

2.33

2.38

4.85

10.35

17.05

1920

6.90

17.20

24.10

r ru , 0 17.05 24.10

fa™ P^?;r„^Tn^r", ,sso and 1935 a °

Xrr:?:: sto9e ,he -l

ppZ1 s °ro b ”

O Nethertads Indies some time b^T°Z‘° T"" h TO

tura^ exno t ^ V ® ry unfav °rable basis of i, increasm 9 P°pu!all,*

i=r-' rS,“~r “--HSrl

The rUbber P-ce 2 w a a n s d oi 9 a 3 s 9 o'teS A was 0 63 0 ,» ,

30 ' 0 315 guilders ^lv.,„ p J V

l*w(trd the appreciation of prosperity in terms of commodities and the
l*'nis of acquiring such commodities.

An increased total income from agriculture cannot absorb all sorts
1 produced or imported commodities and consumer goods unless this
ttt'oine is distributed as well as possible among the workers, thus raising

purchasing power of the individual farmer.

In order to attain this, the acreage under cultivation was extended
•‘••.High migration, so that the poorest farmer from Java became a more
Bilperous one in the Outer Islands. Individual production was increased
'"••ugh irrigation, distribution of higher yielding seeds, and through edu-
Pllon. By the formation of agricultural cooperatives and funds the Indo-
luman farmer was enabled to obtain greater profits from the generally
'pllrr paid export crops. Furthermore, the burden of land taxes which
■ilghed on the farmer's income, was reduced and credit facilities were
Ini* iblished for the rural population. Where onerous debt relations existed,
<l "‘ Government established means of combatting chronic indebtedness.
|y fixing the commercial price of rice at a higher level, more in con-
P mit y with the general index figure, a wider spread was given to the
•"•imented farm income.

It is easy to see that resistance was often encountered from the plan-
Mlon (estate) owners against this state of affairs, which was being strongly
Emulated by the Government in order to give the Indonesian farmer a
‘•"lor share in the raising of export crops and in the profits resulting
1‘twofrom. The Government, however, won more and more followers so
HmI some time between 1935 and 1939 a majority was formed in the
pnple's Council who backed the Government policy. After that, in spite
1 llio difficult times, the material foundation was laid in an ever-quickening
* u,,, po for the possibilities of industrial development.

I I he desire of the Indonesians for new and more numerous com-
"lilies has been a special stimulus to industrial development. In order
** ‘ ^courage this desire in wider circles, several methods have been used.
ilm> of the most efficient propaganda methods in this was the organization
l ninall and frequently varied exhibitions of all sorts of commodities
- l m 1 in rural districts. These exhibitions were often held in schoolhouses
‘•ii the home of the teacher. The use of these articles was demonstrated
. i he teacher in the schools. The children spoke at home about what
•‘ y had seen: shoes, forks and knives, flashlights, bags and trunks,
>»>• I Hollas, etc. The older folks went to see what "teacher" had, and learned
Iml comfort and pleasure these new things could procure.

At fhe

, 801130 fim© rv.

.. ' *** -• io^ ^f e " °PPor*ual«f

i ordw '»<^rr:^ •* «s *:-!

If is natural that J ~T‘“’ U ' at * a,ld «oll (hem.

tive ^hioTZl gradual? UP ofT nded *° the de "

O, “«” «.« of , h ' , ■ ,w «W«. Ti, “

“"■“toted thr 0TOh ““ a ” d «»»=. A, , he 9 ‘*’ ««y

r .!" 7 ° nd ever ‘increasin

Cut

«» *™. taTT 7 m «4*

® e Production

*££ to-r - G °~ ~

**>* c OT .t d * “«« ^o/rrr service **■ -

“* WMific res ™“ Ce ' * «”»i S tod of a S i,tof7'“ eW » f Eco„
S,ndCe - “ “"■Pensive propa °^ dusW »l Pofc,

Of the

and inslm

a=S:SpHS: 2 rs=

orgonizotioo wilnk P°osiblo. If w er fo promote indu.1,1,

AiI Production tept" 08 We,i ad PP»d to , ls ” ""WMly

social-econonil

”<* « «■* «*£,«» ='"dted by *■*—« s< ^?

tactom repor , e(J difflc or whet] u» instoo IT^' M °» ttjf

, “ was instituted and “ indus «a] product- ° r the Senotf
todtogs. In Chopte; “"““w wore token to “ locaI i ”™lo.

too village weaving Z f"'' 5 m «am p I e ol Z <KC " d ‘to„ with »,
mad o ty person J ot ZV" Cm,mI J “™ fo» d ”, “? femM 'o to

» rmMemen, had 0^^°” « too, £“ *""«.

e workers. Without ri i f °° P re P°nderanf n „ ^ tile baknl.
a ul business i n the np-l? Ind ustrial Office ^ 100 t0 tile detr ^U|»

toe unfavorable cucn.ne t ^ Ven «

Nearly

every vi "age has

mOIS 'bazaars" where

a “ kinds of vill age products

are tradod

I his Section also dealt with the larger mechanized industry. In Chapter
I mentioned the disadvantages often attached to the managing agency
factory industry. Whenever serious and well-founded complaints about
fcmditions appeared to exist, the office stepped in in order to change the
■riancial relations between manufacturer and agent by arbitration, or
hi establish new and more satisfactory connections.

In the rapidly growing textile industry, when the large organizations,
» "i<! with investments of 3 to 4 million guilders in sarong production,
■pcrienced competition from the small-scale industries, certain financially
hiwerful concerns tried to wipe out the small-scale industries by price
•l uthing, although the smaller concerns, as I explained in Chapter II,
r* re completely competitive and beneficial from a social-economic view-
fiuiit. In these cases the Government provided for legislation by which
4 lotal production and a production quota were established, a reasonable
Id ice was maintained, and the expansion of the textile industry was put
mi a sound footing.

The subject of legal regulation of production gives a good illustration
Ul the intensive manner in which the Netherlands Indies Government
Htcupied itself with these industrial affairs.

I In order to keep the market open for domestic textiles, a system of
Import quotas was set up in such a manner that there would always be
h market for domestic production. In addition the factories were legally
found to a licensing system. These licenses indicated the productive
opacity of the factory, stated in numbers of mechanical or hand looms,
Wlule stipulations could be added concerning the type of goods to be manu-
l'i, lured, the wages to be paid, etc. In this way it was possible to guard
ii'imnst exhausting price wars, against a cartellization of the large factories
n l he detriment of the smaller ones, against a socially unwarrantable
division of incomes, etc. In short, the far-reaching intervention of the
■dVernment in industrial affairs fostered healthy industrial development,
limieficial for all concerned. The figures given below express better than
words the rapid development made in this branch of industry when these
.usures had come into effect.

Table X

NUMBER OF LOOMS

1930

1935

Mechanical Looms. 43

M Handloonis. 533

400

4,000

1940

6.600

35,000

1941

9,000

40.000

,o --- <>*« bronchi

= establishments, rubber

The Section of Industrial Policy «„ rolI , .

Industrial Instruction, issued regular' roportl T With the Secti °« fc
raw materials and by-products It u l- i °? mQrket prices of ImporL
the expediency of support in certain' 1’^ T g ° Vernment concern!*
exemption of import duties on certain ca^Ti ^ mStance b T grantl||
other than raw materials, by preferonti I 9 °° dS materials <•«*
enrment tenders, by guaranteeing^ inZl^l c «TT ** all ° ttin * 3
o.dmg m the larger industries reguirina ■ uf' by governmen t shat,
jas also the authority which drafted J Caf>itaL This Set*

Unties, quotas, etc. and prescribed^*eJLIT ™ concerning imp,,,

of the managing functions in new factories “ ° Certain U

nesions. w factories were to be allotted to Ini

Working in close contact with ♦». *

government-founded organ for SciendP fT™ ^ Industrial p ohcy, lit,
the technological and the economic aspect ofT^ 1 ReS6arch studied
fmdmgs were passed on to the industfief Th Vari ° US industries - *
four branches: (a) laboratory f or ch ® , ThlS organi zation consisted*
testing materials; CO central bureau ^Th • I

economic research. technical research; (d) bureau |«

r;r of ,he “ -—- **** I

“ d -*. <*«*, OI Indw
2. Chemical research for all tho k t

ment of Economic Affairs, and ^heiT ^ dlViSi ° ns of the Depart,
ment services. ' h nec essary, f or other Govor#,

^ n alytical resprn'r , )n f
-suits of which are

The laboratory f or test' examinatloft

general and Indonesian mater^hT^aT^ 7*” ° f materia) « J
the inspection of materials for the Go^e ^ ^ addition » handl.i
and commerce. The central bureau for ^ ° S for ind "«"v

nic ~ —*> - td:

|tonsibilities of and conditions for establishing branches of industry in
iI k? Netherlands Indies. In addition to this general work assigned to the
laboratories and bureaus, they collect the information for technical and
nconomic improvements.

Industrial instruction is extremely varied and depends on the scope of the
Industry, its structure, and the type of plant operated. It deals with the
election of raw materials and with the manner of using them to the best
•ul vantage from the point of view of profits, of production costs, and of
Him quality of the finished product. Technical guidance given by the bureau
lor technical research is chiefly solicited with regard to the type of plant
which would be most suitable. Although large scale industrial organiza-
llons sometimes require technical guidance which their own specialists
Way not be able to furnish, it is principally the medium-sized and small
plants which are in need of such advice, especially the newer ones.

The export industry, insofar as its requirements are cared for by the
Industrial Department, produces to a large extent raw materials for foreign
industry. The ever-changing requirements of foreign industry necessitate
constant modifications of the processing of raw materials from the Indies
In comply with varying standards of quality and assortment, and in con¬
fine lion with special characteristics of the material. Extensive research is
mii ried on in connection with new applications, and to counteract the
imo of substitutes to replace their products. The lowering of production

• outs by adopting cheaper methods, by speeding up the process, etc. was
not only essential to increase the profits of industries, but to keep them
MOirig.

Industry working for domestic consumption was obliged to exert itself
10 the utmost in order to compete in price and quality with imported
products which came mostly from old, and thus very advanced, industrial

• auntries. In this struggle, the instruction service with its section for
fcronomic-technological research and its laboratories, was at the disposal

• •I the industrial plants, and technical aid was given wherever necessary.

A special office—part of the Bureau for Economic Research—in charge
nl investigating the possibilities of setting up new branches of industry
Ilf the Netherlands Indies, dates from 1940. Even before that time the need
Im id been felt for a survey to ascertain whether it would be advisable
uni beneficial to have certain industries established in the Indies, in
• miection with the economic and structural expansion of industry as a
bole. Earlier Ihore had been such investigations occasionally, carried

• mi by personnel who of necessity had to be detached temporarily from

of this type Of inve.tfgatolTrloroover^ provS^ “
the work over to specialized personnel. ' n ®«ssary to tun

^randolng 1 °and l B VG t' ° ffiC6S Iaboratorl *

and were within easy reach of the l en2 ° rg ' could be visited ),|
very important cottage industry the manufacturers - However, II..

units of the factory-industry, in which mduStr y and the smalls

living, could derive but small profit from Tt. m W ° rkers earn th *

In order to overcome this difficulty the
extensive educational service, establishing Vernm6nt instituted a v.„
tion offices, a large staff of technical and Q DUmber of consult#

of traveling vocational teachers. NaluralW T.T lnS " UC,0rS - °” d °
the findings of the technical sr,wr 7 . h servic es had access It
industrial laboratories: a textile institute ^ ™ addition the y l'"- 1

Bandoeng; a tanning and taSlT T ° *

station a, Djokjakarta Id n^L ^ ° **“* *»«».

oto. The instructors asd d '

contact with the government industrial * eachers maintained cl<«.

332 industrial schools giving instruction^ .! 0Catl0nal schooIs - There w«
Dutch was the medium- 2G hue- , fhe vern acular, and 379 whsi»

and 48 with instruction in Dutch^a^on Ind ° nesian lan 9ua2

to the textile institute, the leather tan , u*™ SCh °° ls attac M

ssr ,or

se>m to *

it probably is peculiar to the Indies It is h h ® rS mentioned “ j
for industrially backward countries The ° f ^ reat important

chosen from the best Indonesian craft QVellng voccrti °nctl teachers 4
in Indonesian vocational condition. ThTybaTet ’ P ““

and good, simple tools, callina an th 7 j * or two assist, m.i,

,he «°< *** of work f ° ps md <»•"

to the boss. Thoy explain ihe ° m ““

the craftsmen informed of nr,’em fi , tbe P r °P er materials; lu,«,

cost prices, teach h^to 1 ^ ^ ^ *> <*«•

teachers are not white-collar men h ? ° f r ° W materials - etc. Tin*.

men. They travel around in theh^ n UP bef ° r6 th ® dass ' but w '" k

techniques themselves, showing whaU ^ demonstr ate the

owing what can be accomplished with

I tools and better materials. It is remarkable in how short a time these
fcichers became the welcome friends of the small-scale workers. They
| "linn board with them, and sit through the long Indies evenings talking
■bout conditions as they are and as they could be. These men, with the
I (Mutructors who do more general work, are the ones who started the new
■ms of cooperatives which I described as industrial centrals, in Chapter II.

Aside from the measures mentioned in this chapter, there are three
•dies appointed by the Government to support industry:

I First, the "fund for small industries," which grants loans at low interest
jhftos to small-scale workers for setting up new production. The fund builds
U|> pioneer industries, which it operates for its own account as long as
r, HinHe industries still hold many risks. As soon as the difficult initial stage
M passed, the Indonesian directors are enabled, by paying off the real
Mine of the plant, to become its owners.

I Second, the "medium-industry credit," which is an institution giving
Hixlit to larger enterprises on recommendation of the Section of Indus-
llol Policy, in cases of oppressive relations with managing agents where
||1im financial position of an otherwise sound enterprise so demands. Such
•tdits are also available for the enlargement of smaller factories which
Hi« well managed and have a place in the general industrial scheme.

I Finally, the Government has added a sum of 10,000,000 guilders an-

illy to the budget during recent years, in order to participate in large
Mustries, which are considered to be of benefit to the community or
ibi country.

I All of these activities of the Government were developed in close

.peration with the industrial leaders and interests of the Netherlands

■dies.

Thus the legislative measures for regulating production came into being

-I a poll was held among the owners and managers of industrial enter-
|<»ines, and a "Council on Legislation" composed of industrialists had
Ih.mu heard. Advisory committees were appointed for every branch of
»♦»• InBtry; they comprise Europeans and Indonesians, representatives of
l ".j<> and small plants. They can demand' to be heard on every production
Nuumure. A commission consisting of industrial accountants and bankers
■ih formed to collaborate with the advisory committees in matters dealing
llflili "medium industry credits." There was also an Industrial Council
'• «locide on whether or not the Government should hold shares in and
fMHit'iote new large industries. This Council was aided by an advisory
.<1 of which Indonesians, Chinese, and Hollanders wero members.

The above does not give a complete picture, but it presents an outllm
of the manner in which industrial development is being fostered. Hi
cordial cooperation between Government and industrialists, between Eufi
peans and Indonesians, which came into being appears to be quite a
important as the greater prosperity which was attained. lust as the indui

trial development in Western countries gave impetus to great soqM
development, so the Netherlands Indies' industrial development nurtui-
greater independence of the Indonesian as a means of his becoming m
independent citizen.

Thus the Government has been greatly interested, especially dun-
the last decade, in the development of cottage and small-scale, as well m
Western, mechanized industry. Until now these forms have been oMl
to exist side by side. It is already evident that cottage industry lags behind
in the progress of development. More and more, the small-scale woiIm#

is taking over the production of cottage industry. However, as long 0
farmers have so much free time as they do in the Indies, cottage indualff
will continue to exist. Nevertheless, cottage industry will tend to decraaH
as the volume and quality of agricultural products per worker increuHl
How to increase these is a problem in itself, which in the interest*
the social-economic balance of Indonesian society continually demomll
new solutions. However, in many special fields small-scale industry vi/A
continue for many years to be a cheaper producer than the wtttfl
organized mechanical factory. So long as there is a great difference U
tween the wages paid in the Netherlands East Indies and in Wfni«it
countries a number of products will remain cheaper if they come lr(l
small little-mechanized factories with low overhead and an elastic wtfl
scale than products which are manufactured in the large mechaiiH
factory. Machines, ready-made in Western industrial lands, replace Bn
ern manual labor. The relation between the productive capacity ol {fe|
large machine and of slightly mechanized manual labor has until h||
determined the form of industrial production in the Netherlands Imll#*
Thus, large and small industry will consequently be able to continue I)
existence side by side in the future.

CHAPTER IV

FACTORY INDUSTRY

Chapter II described certain conditions which have developed in

.chanized industry, and I shall devote this chapter to a description of

lh« results obtained in the Netherlands Indies.

In what is called factory industry, manual labor has been replaced to
•4 qreater or lesser extent by machine work. The rate at which a factory
II mechanized is dependent on the wages to be paid and on the productive
L wer of the machine. Until now it has nearly always been found in the
Netherlands Indies that parts of the production can be made cheaper by
timid labor than by machines. The extent of mechanization possible is an
iHlthmetical problem in each individual case. As wages go up, and this

in taking place, continued mechanization becomes more expedient. How-
»vor, a large factory in the Indies, built along American lines, after oper-
Utlng for some years, began "de-mechanizing" certain parts, since this
li. id a favorable influence on the cost price.

Whatever this relation between mechanized and non-mechanized in-
Litry may be, it is clear that in the Indies a rapid development of factory
industry is taking place. The index figures in Tables I and II show this
.Imirly, as do the statistical data, only partially published thus far, 1 which
h,tvo been assembled for 1939, covering 25 branches of industry with
I VlH factories and 172,368 employees, and for 1940, covering 52 branches
nl Industry with 5,469 factories and 324,210 employees.

| The factories investigated all work independent of agricultural or
mining estates. Thus, the sugar industry is not included, although the
confectioners are. Tin-smelting factories are not included, but metal-
immufacturing is. The mineral oil factories are not included but the coconut
nil factories are, etc.

The available figures make it possible to give a picture of the indus-
Mid position attained in 1941. The statistics are too recent to be used to

I Ii,du»tria in N#dorland«ch IndWi." Vconomlsch Weokb/ad, May 1941.

demonstrate the development described in Chapter I. However, som*
comparative figures for 1939 and 1940 have been assembled covering*
branches of industry, and are given in the following table-

Table XI

Type of Industry

Number of
Factories

Number of
Workers

Production
in 1939

Dec. 31 Doc. 31
1939 1940

Dec. 31
1939

Doc. 31
1940

Canning . 5

Starch . 220

Rice Mills .1,040

Vegetable oil

and margarine . 105

Palm Oil . 3 x

s °aP . 13

Fireworks . 20

Rubber articles .

Sawmills .

Furniture ..

Wood barrels

and cases .

Other wood products..
Printing .

Tanning .*.

Weaving .

Shoes .

Public electricity .

Tiles .

Glass containers .

Iron castings .

Tinplate works .

Stool barrels .

Agriculture

machinery .

Repair shops
machinery .

Hopalr shops
oloctrical .

Shipbuilding
and repair

Wagon building

Automobiles, repair
and assembly .

105

19
10

268

20
131

115

213

Totals .2.538

226

315

988,000 kgs.

220

13,872

7,566

187,138 tons

1,137

26,618

28,560

1,114,825 tons

113

6.788

7,107

202,530 tons

5,102

3,950

298,290 tons

1,743

1,864

15,307 tons

3,699

1,936

1,256

billion pcs.

1,403

3,371

858 tons

103

5,183

3,957

130,032 tons

397

813

436 tons

1,963

2,147

2,229,000 pcs.

206

166

773 tons

284

14,309

15,162

16,227 tons

1,302

1,293

594,000 hides

200

37,342

50,168

36,618,000 meters

1,329

2,519

610,000 pairs

126

8,407

9,274

325,200,000 kWh

1,702

2,497

18,700,000 pcs.

829

1,617

3,455,000 pcs.

439

392

3,118 tons

1,497

1,705

21,300,000 tins

251

463

479,000 pcs.

9,005

10,559

14,691 tons

282

13,726

17,812

1,279
tons steel

163

606

1,569

385.7

tons metal

4,303

7,268

4,037

tons metal

6,993

5,895

5,537

tons metal

1,228

3,346

tons metal

3,010

170,468

193,291

Production
in 1940

1,418,000 kg*
223,742 tom
1,202,826 tons

220,538 tom
236,651 tom
16,588 tom
739

billion I**
2,200 tom
118,917 too# .
943 tom

2,605

1,185,

81,823,

3,196

969,600,

28,420

17,674,

31,500,

589

,000 pen
231 tout

: ,000 tons
(appisy

,000 him*
,000 muMf
,000 puli#
1,000 kWh

,000 pm
,000 p< n
,000 tom

(cip|its||

,000 tin#
,000 pc*

30,062 tom

Thus, in 1940 nearly 500 new factories were established in these
I branches alone, engaging no less than 23,000 workmen. The total number
; nl mechanized factories was about 4,800 in 1935, and in 1939 had grown
I In about 6,100. If the development of 1939-1940 (unfortunately the only
I yrars for which we have reliable figures available) is taken as a basis,
I II may be concluded that fully 55,000 workmen are assimilated yearly into
Ipactory industry.

Chapter III explains what was being done, both in vocational schools
mid by traveling teachers, to train skilled labor. It must be considered
I lhat it was also necessary to train more and more teachers, as well as
■u great number of surveyors. The tremendous educational task at that
■time could not be managed by the government alone. Private initiative
I l»« id to step in, and took over several branches of instruction. At the same
nine a strong movement of workers took place from small-scale to factory
■ Industry. In each locality where a shortage of workers developed—this
shortage was becoming acute in the last few years, especially in the
I imdile and in the shipbuilding and repair yards—local training schools
■wore set up, where, in turn, the recruiting of teaching personnel caused
I many headaches.

Table XI listed the factories which appeared in the census of 1939. In
11140 this number grew to 5,469. Grouped by industries, the picture, accord¬
ing to the census at the end of 1940, was as follows:

Table XII

Factories Factories Number Average per

l»ii|»!Htry on Java other Islands of workers Factory

Bftdstuffs . 1002

leverages . 177

Mmicco . 115

v*<i oil, margarine, etc. . 824

• Hlmicals . 61

Rubber articles . 10

WimmI products . 81

hinting, binding, etc. 251

THtming . 23

i ullle . 231

i Intliing, shoes . 24

ftmi and electric. 518

hlilhonware, glass . 100

M*lal . 34

Repair shops and shipbuilding. 476

TOTAL . 3.927

605

43,068 (a)

163

5,005

53,547

464

254

21,850 (a)

6,038

3,371

240

7,083

15,842

1,583

50,168 (a)

210

7,624

212

11,232

154

12,371

102

3,710

116

46,449

1,542

324,210

(cl) Not comploln Not available from certain branches. The total is therefore greater than these
|l <>u**d would Indicate*

The total value of wages in these industries is incomplete and thera
fore cannot be accurately presented. First we may note that 70% of tht
factories are in lava. Also, the factories are not large—the figures covering
the number of men employed show this. This spread of work over many
smaller factories, which are also geographically distant from each othor,
is naturally beneficial from a socio-economic viewpoint. The form of
Java, a very long, narrow island, and the nature and origin of the industry,
lead to this. This tendency was further strengthened by the former hi« |l»
cost of transportation by land and sea. While it is true that this cost hell
been lowered considerably in recent years, still as a result of vestml
interests in railways, and Western-organized steamship lines, it continual
to be too high to make a concentration of industry advantageous. To giv«
an idea of the difference in transport costs, the average freight rate Irt
Java is from 3.5 to 7 Dutch cents (approximately 2 to 4 U. S. cents) })«•»
long ton, while in the United States the average rate is about 1 U. S. com!

In Table XIII, given below, are grouped the more important statistic!
bearing on conditions in the industries given in the previous tables.

Table XIII

POWER AND FUEL CONSUMED IN FACTORIES LISTED IN TABLE XII
(Except 471 repair shops, for which no figures are available)

No. of Motors.

No. of Mechanized machines.

Hard Coal used (tons).

Oil Used (tons).

Gasoline (1000 liters).

Firewood (1000 cubic meters),

Gas (1000 cubic meters).

Electricity (K. W. hours).

Lubricating oil (1000 kgs.).

25,818

55,970

93,920

72,075

1,124

886,414

23,256

94,996

2,589

Figured in k.V.A. (kilo-volt-ctmperes), the average motor was of |
k.V.A., while the average for each factory was 64 k.V.A. About 7,4(1
Europeans and 18,889 Chinese were employed in the factories. There w* *|#
about 24% women among the workers, preponderately in the tobci<<fl|
factories (39%) and in the textile industry (34%). The ratio between um
aging personnel, minor supervisory personnel and laborers was 1.6%, •
and 92.4% respectively. While the complete totals of wages and salaries p«U|

nre not known, the total for 1940 covering a large percentage of the fac¬
tories employing about 146,000 workers is known, so that we can make
(i rough estimate of the wages per worker. Assuming that the increase
In 1940 was the same, the average number of workers can be estimated,
mid on the basis of this, an average yearly wage can be arrived at,
which would, perhaps, be somewhat on the low side.

Table XIV

YEARLY INCOME OF INDUSTRIAL WORKERS

Wages pei

Estimated year per

No. workers average Wages in worker

Groups Jan. 1, 1941 in 1940 1000 gldrs. in gldrs.

I Preserves, starch, ricemills, foodstuffs.

soft drinks, veg. oil and margarine.

40,918

38,000

7,665

202

II Alcohol, ice, gas, soap, shoes.

7,665

7,120

2,149

302

Ill, Rubber, woodwork .

19,797

18,420

4,461

242

i V Dyes, chemical, zincographic, limestone

20,108

18,690

6,524

349

V Iron, steel, press work, repair and
other metal constructions.

58,283

54,600

22,734

416

TOTAL .

146,771

136,830

43,533

318

In estimating the value of these wages, the purchasing power of the
guilder must be taken into account. These figures cover a period of great
industrial expansion, so that a large number of apprentices must be

• minted among the number of workers. Their exact number is not known,
l>ut it would be safe to assume that 10 to 15% were boys and girls younger
I Kan 15 years of age. 2

It is not known how many of these young people work in the family
»ircle. We have seen that in the industries studied, 24% of the workers
nm women. Thus it is certain that the average income per family is con¬
siderably higher than that given for individual workers in the industries
Munitioned in the table.

In addition to the amount of wages paid, it is of special economic
significance to consider what portion of the raw materials for industry
••m be supplied by the land itself. Surveys of this have been prepared
!>y the Industrial Service in the Indies. In 1940 the resulting figures for
llitt branches of industry covered were as follows:

’ In 1930 In lli« t! A tlioia wore* 49 million gainfully employed, of whom 11 million were women,
4) nut 0,7 million w»«*» under I*• y*ur» of age.

Table XV

COST PRICE FACTORS IN PERCENT OF GROSS VALUE, IN 1940

Kind of production

Gross value
of production Wages

Raw

Materials or
constituent
products
produced
in N.E.I.

Ditto

imported

Balance

Not J
Nation®
inconti

Preserves .

. 100

13.2

25.6

26.7

34.5

55.5 ]

Soap .

. 100

10.8

37.5

15.7

54 i

Rubber goods .

. 100

29.7

22.7

19.8

27.8

Sawmills .

. 100

3.6

21.4

Printing .

. 100

8.5

31.5

Steel construction and repair.

. 100

7.5

36.5

38.5

Tanneries .

. 100

57,5

28.5

Tile, bricks .

. 100

Biscuits .

. 100

15.6

23.3

13.1

Weaving .

. 100

7.7

20.3

31 ,

Confectioneries .

. 100

8.2

26.5

9.8

55.5

Margarine .

. 100

7.4

5.5

23.1

Paint .

. 100

6.5

25.5

121

Weighted average in N.E.I.

. 100

17.7

27.3

ahmit

55l|

Average, secondary industry in

Australia . 100 20.1 59.3 20.6

Using the average figures for Australian secondary industry for conv
parison, it appears that the "balance" figure for the Indies is perceptibly
higher than that for Australia, a country which also had to import Ml
machinery from abroad until very recently, although its industrial devolopn
ment took place much sooner. The comparison shows that Netherldmln
Indies industry apparently has passed the difficult age, while industrialiwt*»
still profit from the advantages of the early start.

In figuring the cost price components, the Industrial Service at tin
same time made a calculation of the direct national income derived flow
various industries. By this is understood the total of incomes from wutjtl
and obtained from native raw materials, insofar as these were unu*«4
before the industry was established (for example: clay in the tile <jih|
brick industry; sand in the glass industry), and from the profits mado by
the entrepreneur. Thus, dividends and interest are not included, nor me
incomes obtained from the importation of machinery and raw materlMl*
repairs and maintenance of equipment and buildings, etc. The actual tolnl
national income is, therefore, certainly substantially higher.

These figures are of the greatest importance in estimating the vtiltM)

of an industry in a setting like the Netherlands Indies. The Government has
always strived to obtain only such industries which logically fitted into
the economic system of the country. In this—except in a few very special
cases where defense interests were at stake—there was never any attempt
at autarky. The legal regulations even give the right to prohibit the
establishment of certain branches of industry, and to set a ceiling on
production. This control over the component parts of industry made it
possible to decide whether limitations should be placed, and if so, to
what extent, in order to achieve the greatest benefit for future develop¬
ment. These data are of the greatest importance for the Office of Industrial
Policy.

From the data in tables XI and XII, it is clear that the industry of the
Indies is growing into a consumer goods industry, chiefly for domestic use.
This was natural and it is probable that this tendency will long persist.
If this development is guided along such lines that in general only those
articles are manufactured which cost less effort than the producing of
raw materials with the same trade value, then it will lead to perceptibly
rjreater prosperity, while at the same time, a wide market will remain
open for imported commodities and capital goods. 3 For this future develop¬
ment there are many favorable natural factors.

In Java there are still 76,000 horsepower (in units of more than 2000
horsepower) of undeveloped water power available; besides this amount
there are a lot of smaller sources, the total volume of which is not known.
Thus Java is not rich in this resource, but the presence of oilfields makes
ll possible to use natural gas and cheap oil for power also. In addition,
coal as a source of energy can be obtained in any quantity from the
Outer Islands.

There are other important sources of water power in the Outer
Inlands. Insofar as these have been observed, one has been found of
063,000 horsepower at the Asahan River in North Sumatra; this has been
harnessed and is to be used for the aluminum industry; in Celebes, near
i arona, there is available water power of 180,000 horsepower; near Posis,
V‘20,000; near Tonado, 64,000; and Naen, 16,000. These sources of power,

• •I which the first mentioned is near a bauxite deposit, and the latter
i mar iron and nickel deposits, can and will be of great value in the future.

The development of electric power has made rapid strides in recent
yoars. The last ten years have seen the harnessed energy doubled, and
In the last twenty years it has become thirty times greater. At present

3. Soa Cluiptfti V.

4!i

550,000 horsepower are harnessed in generators of more than 25 k.w„
while 3,400,000 horsepower of water power in sources greater than 5011
horsepower are known to be available. The future industrial developmoul
will be well able to use this. Water power has been expensive to hamoM
in lava; the large sources in the Outer Islands have been much cheap*
to use. The price per k.w. hour on Java, taken from public utility figuron,
varies for industrial use from 2.5 to 6 Dutch cents (1.4 to 3.3. U. S. cento),
The cost price in great power plants in the outer islands is probably
between 2 and 5 Dutch cents (1 and 2.8 U. S. cents) per k.w. hour.

The tropical climate, especially on lava, is generally moderate, ami
by a good selection of location one can secure advantages in temperatm*
and humidity. Actually, with modern air conditioning, the factor of clinvito
has become less important, although in the Netherlands Indies it cannot
always be considered as favorable. The great daily variation in humidity
which fluctuates on an average from 48% to 86% is a handicap for mcmy
branches of industry.

The Javanese is a good worker, although his short stature 4 and li<|M
build make him less suitable for heavy work. A repetitious operation
when no great feat of strength is involved, suits him very well, and lito
performance, after a short period of training, is in that case as good <t|
that of a European workman. As the work gets heavier, his performani’l
rapidly declines. Thus the Javanese is an efficient worker in the texllli
and cigarette industries; a workman with great possibilities in the mam'
facture of bicycle tires, but not so good for automobile tires. He is alt#
very inventive; this quality finds opportunity for expression in small-wito
industry.

Much was said formerly about the great drawback of absentootol|
among the Indonesian workers, but this appears to have been exaggerate!,
although it seems probable that absenteeism is somewhat higher hoi« m
mechanized industry than it is in similar factories in Europe. In the
spinning mill, established in lava in 1937, absenteeism—exclusive of Jtl#
ness or accidents—was only 3% in 1940. Within two years this factory Util
attained a productivity per worker equal to that of an average puuj|
spinning mill.

In the years when industry was growing so rapidly, greater inlm«i!
in the trade union movement developed among the workers, although
movement did not advance beyond the primitive stage. In 1935 there whip

4. Tho Javanese weavers' choice of Japanese looms was partly duo to the fact that them- I" *1
are built 6 inchos lower.

Ill trade unions with 72,675 members; in 1939 there were 75 with 109,547
members. Thus there was growth and concentration. In 1939 there were
18 strikes of from 1 to 12 days, involving a total of 1,628 workmen. The
motives were wage disputes or unjust treatment of one or more workmen
by the overseers.

There are other factors in the development potentialities of mechanized
industry. Thus far a typical industry of consumer goods has developed,
npread over the whole territory in comparatively small units. Many of
these factories use quantities of raw materials and semi-finished goods
which it will certainly be possible to produce in the Indies. In general such
nemi-raw materials are only advantageously handled in large quantities.
Since the export of such products is nearly always impossible, the domestic
consumption must be built up in order to undertake manufacture thereof.
The use of various producers' goods has slowly increased to such an
extent that new possibilities developed. Thus the use of cotton thread for
weaving grew from 3,000 tons in 1930 to 28,000 tons in 1940; 5 consequently
nizable spinning mills could be built. Owing to a sharp increase in the
noap industry, the consumption of caustic soda during the same period
Increased from 4,000 tons to 18,000 tons per year. 6 As a consequence of
ilie developing mechanization and expansion of repair and construction
( hops and shipyards, 50,000 tons of scrap steel became available yearly. 7
The use of various chemical products has grown from about 300,000 to
h()0,000 tons since 1934. 8

This growing consumption of various materials stimulated the estab-
linhment of many factories in the Indies; however, entrepreneurs had a
justifiable fear of taking on these factories which demanded so much

• upital, and which, without exception, required a rather large concentra-
llon of production.

Freight rates by land and sea are high in the Indies. The hesitation

• >ii the part of entrepreneurs was overcome when the Government itself
"dually began to work on the problem and a series of large factories
*ould be undertaken simultaneously. It was calculated that a private
••Kjanization set up jointly by a number of factories for sea transportation
1/ small motor ships to bring in the raw materials and take away the
imished products would lower shipping costs to nearly 35 per cent. When

’• s JP?, nn,n 4 7 Tegol is in operation; in Semarang, Koedoos and Paioorooan, mills aro

Mn«j built. Altogether, 160,000 spindles.

(». A soda factory with a capacity of 15,000 tons caustic soda and 15,000 tons feitlll*..ui wan in
ti»**i'uration.

/• ml11 w,,,, "I"'" Ixxiilh furnaces and a simplo rolling and hnmmoi mill w<im lining plmnuul

11141 for 11ir* pio. miHln., of 41),000 tons of scrap.

U. A chemical pi.ml wllli a capacity- of about 65,000 ton* wa* being built nl TJtpoe

this was proved, five projects for fundamental industries were begun
within a year.

There is still considerable difficulty in the Indies in obtaining well
trained managing personnel. Since industrialization is still in its infancy,
specialized personnel for organization and management is not yet avail
able locally. This personnel has to be imported or trained. For small-scalo
and smaller mechanized industry a training system has been organized.
In effect, more and more Indonesians with theoretical training are bo
coming available as the University of Bandoeng trains civil, mechanical,
electro-technical and chemical engineers. But these young people lad
the experience necessary to build up and operate industrial enterprise
independently. The structure of the overseas factory has solved thin
problem.

Finally, the question of whether or not raw materials are availabla
locally is of the greatest importance. There is neither cotton nor wool
in the Indies. While there have been extensive experimental plantings of
cotton, they have not given very encouraging results thus far. It is not
likely that large cotton plantations can be developed. The climate of Java
is, in general, too humid; furthermore the available agricultural acrecnjti
must be used for food crops. Cotton cultivation always requires extensivi
areas. Possibly, a limited opportunity for cotton planting exists on soma
of the smaller islands east of Java. It will remain necessary to impoil
cotton for the textile industry.

There are many possibilities for industries using agricultural product^
wood, fibers, rubber, tapioca, vegetable oils, hides, sand, clay and limfl
stone. For the whole metal industry, which until now has been using
300,000 tons of imported metal per year, even more metal in all form*
will have to be imported.

CHAPTER V

CONCLUSION

What course will the development of the Netherlands Indies' industry
lake in the future? To answer this question, it is desirable to consider
further the industrial possibilities in the economic life there.

Industry in the Indies in its first phase developed in two directions—
(»ii the one hand as village commodity production, and on the other as an
adjunct to the large estates. A comparatively important small-scale in¬
dustry producing consumer goods for the local market grew out of the
village industry when the people's purchasing power from agriculture
increased.

In the meantime, education and travel had stimulated the desire for
more commodities, so that the Indonesian villages were a ready market
l'ir all sorts of new products. At the same time the Indonesian community
was progressing; men with ability went into the factories not only as
l-iborers, but also as managing partners. Production centrals in many forms

• ind variations were taking the place of obsolete economic forms. The
Western entrepreneur, who in many cases took the initiative in production
which was comparatively difficult from a technological viewpoint, was
i Kissing on his knowledge and experience to the Indonesian. Consequently,
Hie Western entrepreneur always had to go on to even more difficult
I'tocesses. Thus industrial growth was speeded up.

The impulse to industrial development in this second phase came
iiom the higher incomes obtained in primary production: agriculture,

• Mining, fishing, cattle raising, etc. This developed a typical production of
consumer goods, in both small and factory industry.

In primary production considerable agricultural and mining industries
!•• id already coino into being. These, however, largely served the oxport
ihmIo. The moil important ol them are given in the following table.

4 !)

Table XVI

AGRICULTURE AND MINING FACTORIES

Type of Industry

Number of
Factoriou

Production

1939

ApproximuU
Percentai|«
used for Honii
ConsumpliMii

Sugar factories .

Rice mills .

1.500,000 long tons
1,200,000

120,881

421,000

223,000

108,000

120,000

250,000

263,178

5,193

18,000

118,000 cubic meters
200 long tons
7,036,348

14,000

160,000

Tea factories .

Rubber remilling factories

Tapioca factories .

Fibre factories.

Coffee hulling factories

Palm oil factories .

Vegetable oil factories ..

Etheric oil factories

Kapok cleaning .

Sawmills .

Quinine factories .

Petroleum refineries ....

Tin refineries .

Saltponds and refineries

100

In addition to the factory production mentioned in the above tabl*,
there is an important production of similar goods among the fannoi.

emselves, both in cottage and small-scale industry. For instance, besulo,
he factory sugar production, there is a production of native sugar, bo]
from cane and from some species of palm. There is an extensive taplj
production for home use, as well as an equally extensive production
vegetable oils, especially coconut oil, for home use.

Aside from rice mills, coconut oil factories-which are included unci...
vegetable oil factories,-sawmills, saltponds and refineries, the agricJLijt

hade" 11111115 “ TaWe XVI are ^sentially servants to the ex,.

e products which often undergo an intensive technological proc#J

mg m the Indies could, in many cases, be processed even further so I.

here will undoubtedly be an expansion of the finishing industry. In I
general, this type of industry will remain limited to the standardization ..!
products unless further processing offers definite economic advantage

Besides the export of about 14,000 tons of tin, approximately 25,000 ..

ons of tin ore are exported; in addition to 200,000 kilograms of quintn#
approximately 7,000,000 kilograms of cinchona-bark are exported. In oM-
50

lo save shipping space, complete processing of tin and quinine will un¬
doubtedly take place locally in the future.

Furthermore, the future will probably see a further standardizing of
lubber 1 through a suitable factory process of preparation. The growing
demand for tapioca as paste and as starch has already made several
udditional processes necessary in that industry. It is difficult to say,
however, in what direction these processing industries will develop. This
will depend on the actual requirements of consuming countries for the
product, and on their future requirements, brought about by further indus-
hial developments in those countries. Insofar as it is possible to foresee
l his, there are no great potentialities here. More may be expected from
the processing of various industrial by-products which are at present
thrown away, and of raw materials which are now being exported with¬
out any refining. In the Indies, for instance, the bagasse from the sugar
industry is still used as fuel, although this by-product is good raw material
lor the manufacture of wall-boards, paper and rayon. The residues and
molasses from this industry are only used to a limited extent for alcohol,
hut for the most part exported-not less than 200,000 tons annually. This
hy-product would be good material for the manufacture of yeast and
vitamins. In the rice mills, mountains of bran are burned; in the tea fac¬
tories much ordinary leaf tea and tea dust are lost; in the fibre factories
Mome of the material is considered worthless and is thrown away; in
kapok cleaning a great quantity of kapok hearts remain unused, etc.
The research organizations mentioned in Chapter III are all seeking prac¬
tical means of processing such by-products to good advantage.

Nevertheless, the above offer only a limited field for industrial expan¬
sion; the raw materials which are exported in natural form or but slightly
processed offer greater opportunities. The principal products in this
category are: hides of which approximately 7,000 metric tons are ex¬
ported annually, resins and gums 32,000 metric tons, tanbark, 18,000
metric tons, and bauxite, 300,000 metric tons. Plans have recently been
'ompleted for the manufacture of aluminum from bauxite. Making hides
Into leather, also for export, was growing steadily, and can undoubtedly
I"' expanded still further. At the same time the extraction of tannin from
harks will be considered; this production will become greator each year

• ►wing to intelligent reforestation. A technological process wan worked
nut for refining resins and gums, by which a standard produrl could be

1. For example, rubber technology may develop projoctn whereby lah>». ih» li.jui.l . .1 Ml ),|„.i,

* 11 play a role, and from this wo cbn expect other procomtliigN hi th« N»lh»il.imln

offered oa the market, and a pilot plant was being built. But, here again,
all these processing industries will only make possible a limited indul*
trial expension.

It is possible that nickel production from the rather extensive nickll
fields in Celebes may form a worthy trio with tin and aluminum pm
duction. But since the consuming territory is elsewhere, the further pm
cessing of nickel will probably take place elsewhere. While antimony<
molybdenum, mercury, tantalum, columbium, titanite, bismuth, magne.*ui«>
dolomite and other ores also occur in the Indies, so far as is known, tlioy
are not found in rich deposits or in important quantities. Good clay, whl« h
has been sought for years for the pottery industry, has not been found.

The ladies do not possess good quality iron and coal necessary la|
developing heavy industry with accompanying machine industry <uw
extensive shipbuilding. The iron ore found is poor so that refining is dttff
cult. The available coal is soft and poor-burning. In this respect also tht
industrial possibilities of the Indies are limited.

Better, even great, possibilities exist in the clearing of forests and lli«
manufacture of wood products. In the field of turpentine and resin diMtlll
ing, and of wood pulp, paper and synthetic silk, the natural resource# ••!
the Indies offer many opportunities. The reasons why these opportunist
have not been utilized heretofore are principally the excessive co*i
transport and also the extremely varied types of wood in the forai»||,
Through reforestation work over scores of years, however, new condilinM#
have been created; transportation costs have also been lowered, so tlttli
in the near future industrial expansion in this field will be possible.

The fishing industry also offers a few, though very limited, indu*hiMl
possibilities. The seas round and between the islands of the archipolciqif
are in general not rich in fish, and the kinds which are caught do nut
justify any hope that a great canning industry, like the American 01 tiff
Japanese, could be organized. (The fish production for 1940 was
300,000 tons of fresh fish.) The fish-salting and other preserving fact mill
for domestic consumption could be slightly enlarged.

Fruit canning also offers only a limited possibility of expansion lit
th© provision industry. The fruits grown in the Indies are generally «»l 0
different quality, apt to deteriorate more rapidly than those grown tu
temperate zones, so that the canning business, at least for the pinfumlj
offers but small chance for expansion. There is quite a large potoiill<ilUf
in the field of soft drinks, but this would bo only for domestic consumptw*#

und would not materialize until the purchasing power of the masses could
|*ormit it.

Cattle raising in the Indies does not offer a basis for important indus¬
trial expansion. The native cattle are principally draft animals, and
unsuitable for dairy products. Pastures were unknown. Fertilizing the rice
holds is done by irrigation, not by manure, and therefore it was not
necessary to keep livestock as in European agricultural countries, like
Holland and Denmark. With the importation of dairy cattle an attempt
was made to meet the comparatively small demands for milk, butter and
, heese. At first an endeavor was made to cross these animals with British
Indian cattle, but the results were disappointing. Better results were ob-
Ifljned with Dutch and Australian cattle, principally in the mountains. It
[)• clear, however, that with a total of about 130 heads of cattle per 1,000
i inhabitants, nearly all for slaughtering or for draft purposes in agricul-
ime—horses are not used in agriculture—and with less than four milch
lows , 2 per 10,000 inhabitants, there is hardly a basis for industrial develop¬
ment. Since land given over to grain produces six to seven times as
HUtch food energy as the equivalent land used for dairy cows, the dense
I population of Java made cattle raising for dairy purposes practically
I impossible.

There are not many minerals. Oil production is about 3% of the world
I total; the coal yield, about 2,000,000 tons a year, will burn, but cannot
I |w made into coke. Tin and bauxite are important, but only the latter ore
wim support an industry of consumer goods. For the time being, tin will
i hi i ire to remain an export article since the quality of the available iron
■iii' and coal makes it impossible to set up blast furnaces with rolling mills
I which would be necessary for a tin plate industry. The primary wealth
lit the Indies lies in the extensive and good agricultural lands and in the
Kill 000,000 people whom we have learned to know as excellent workers.
| ncause of these factors it was possible to secure enough food for them,
|i,„| to develop an extensive production of agricultural raw materials, in
Imisequence of which the Indies became important in world trade.

It is quite remarkable that agricultural export products are nearly
I nil obtained from plants brought to the Indies, from other parts of the
l.'ild. Rubber, coffee, tobacco, tapioca, quinine-these are immigrants from
I'tith America and Africa. The tea bush came from China and British
India, and oil palm from Africa, etc. With perseverance and Industry
lliime cultures have boon developed and improved. The earnings from

Two tlili«I** •• ♦ m»iI* l» t own aonio lrom Australia or from Holland

these sources have yielded rich profits for the entrepreneurs, 3 but aim
as a consequence thereof it was possible to build excellent highways, aft
extensive system of railways and irrigation works, and to make education
and health services available. And not only is capital formed by thnn»
activities to further expand the work of the entrepreneur, but also invnut
ments are being made by and for the Indonesian population. Here fomi
dations were laid for a further and more rapid progress of prosperity.

In the meantime, the Indonesian people have grown mature for un
intensive cooperation in the future building up of prosperity. One of llm
means of reaching this will undoubtedly be industrial production of co#
sumer goods organized on a wide scale. This production will certainly
not be for the local market only. The position of the Netherlands M i...
with its 70,000,000 workers and consumers, and therefore with the posml.ll
ity of a large domestic market, certainly facilitates the finding of mar liol*
in British India, in Thailand, Indo-China, Malaya, etc. A number of articlaft
were already being sold to those countries.

In many places this study has shown that agricultural production It
the starting point for prosperity in the Indonesian community. For a lulnit
development, the great wealth of fertile land, including the still Ln«»
ploited territories in the Outer Islands, the favorable climatic concjflofti
the situation of the archipelago on many sea lanes, and the fact ilo.i
among the 70,000,000 consumers some 62% are agricultural workers, nnmt
continue to be the basis of any government desirous of stimulating pi..*
perity.

The farmer's purchasing power must first be increased, otherwisn llt|
volume of consumption would remain too small. In Chapter II are detallm
various measures of domestic policy which were applied and which boijAft

to show marked results in the years between 1935 and 1939. Tho ..

results of these measures were good in spite of the increasingly unlay#!
able rate of exchange during the last ten years between our raw matmlftM
and the imported commodities, which counteracted this developing
The index figures in Table I show this clearly. Tables covering a loiiyuf
period would demonstrate it even more clearly. In 1913 an Indoiie*ln»
rubber planter could get a sewing machine in exchange for 40 pound.. ..!
rubber; in 1939 he had to give 240 pounds. 4 A tin of imported suliimft
could be obtained by the Indonesian farmer for two pounds of copm In

ico nrfn l nnn We ®* am ino the siims paid out of tho Indies from 1935 to 1939 wo so© that an .ivui
byoulsW 0 o?s 0 in Vho lidi‘"s dmdend ^ and mlorest lo " ,ho coun,r r> 01 about 4.5% of tho capital lo.a]

4. In 1932 ho had to pay 520 poundn of rubbor for tho sarao m a chin#. At thin low ooint lnim
cooporation Bomowhat improvod this impowible ultuation. P ' . 1

l!)13, but in 1939 it cost him six pounds. In 1913 an Indonesian gum
collector could obtain a bolt of imported cotton goods for seven pounds of
tjums, but the same goods cost him no less than 20 pounds of gums in 1939.

Should the rate of exchange become more and more unfavorable for
lands producing raw materials, the only solution would be for them to
attempt to be self-sufficient in the sphere of capital goods and commodities.
That way, the increase in prosperity will inevitably advance ten times
more slowly than when raw materials can be produced in abundance and
exchanged for commodities at a fair rate with the industrial countries
which need them. Naturally, these commodities must be other than the
ones which the raw material countries will be able to manufacture them-
tmlves. Complicated products, and those difficult to make, such as motors,
lnctory installations, automobiles, airplanes, sewing machines, radios,
watches, etc., will be the ones which can be imported in ever-increasing
quantities: it will then be possible for structural steel, cables, tinplate,
bicycles, hinges and locks, many classes of household articles, etc. to
miter these lands in a wide stream. Cotton, preserves, dairy products,
.lyes and paints, etc., can then be bought by the 70 million consumers of
ihe Netherlands Indies.

The situation will mean a rapid growth of prosperity for raw material
.lountries, and thus for the Indies. At the same time, if it is attained gen¬
erally, it will stimulate world trade and might become the means of
mitigating unemployment in the essentially industrial countries, and of
•naintaining or improving the standard of living in the latter.

In one of the publications of the Brookings Institution 5 the question is
•mked, with reference to the United States: "What would be the result
upon consumer demand if, by some means, poverty could be completely
. luninated, and if there were very moderate increases of income among
lb., families in the middle classes?" A similar question can be asked with
i Inference to the Netherlands Indies: How will the Netherlands Indies
•t&velop further economically?

The following table gives, very roughly, the Indonesian income and dis-
Uirsements, as estimated from data at my disposal:

Amotlm'B ( iffn' Hy In I'muiuro#, 4th odltion, p. 117.

Table XVII

INCOME AND DISBURSEMENT OF INCOME IN 1540
(in millions of guilders) (see note 3, page 54)

Workers
(in millions)

Income

Food

Home

Furnishings

Cloth¬

ing

Other

Commodities

MmI

mi*#

1. Agriculture, cattle

raising, fisheries ....

14 (a)

1,800

990

220

163

340

2. Secondary

production, mining

3.4 (a)

650

257

1 Ml

3. Others .

4.6 (a)

900

315

142

120

? Ml

3,350

1,562

460

206

370

751

(a) Probably 8.4, 2.7 and 2.8 million families, respectively.

The extent of imports into the Indies and of the gioss production volu*
of the domestic commodity industry may be estimated as follows:

Table XVIII

(In Millions of Guilders)

Home Olhtt 1

_Food Furnishings Clothing ComnmJMH

Imported ... 80 40 130 Mil

Manufactured .... 250 390 80 3Ml I

In order to make possible the production and consumption as <|iv«n
in the tables, the sum of approximately 10 billion guilders, including t<«
mercial capital, had to be invested in the Indies.

From 1870 to 1900 incomes in the United States increased as folio wn*

Table XIX

GROWTH OF NATIONAL INCOME IN U.S.A.

Number of Workers Income in HiIIIm«|

in Millions of Dollar* J

_ 1870 1900 1870 mini

Agriculture . 6.90 10.7 1.78

Manufacturing . 2.72 7.6 1.75

Others . 2.80 8.7 3.19

Totals . 12.42 27.0 6.72

In these years we see a strong industrial development. The mmtliit
employed in secondary industry grew much more rapidly than tho immi*ai
of farmers.

6. Taken and adapted trom tho iigurea In Clark'* The Condition ot Economic Ptoqrnaa.

Although this development will have a different course in the Nether¬
lands Indies, particularly since natural circumstances there are not so
lavorable as they were in the U. S. A., an increase in consumption and
production were it to take place in half the tempo of the economic growth
of the U. S. A. between 1870 and 1900, would influence the figures given
In Table XVII as follows:

Table XX

INCOME AND DISBURSEMENT OF INCOME IN MILLIONS OF GUILDERS
(Theoretical Situation, twenty years hence)

Workers Home Other

in Millions Income Food Furnishings Clothing Commodities Balance

Agriculture, etc. 17.8 2,770 1,400 360 160 330 520

hncondary industry . 6.4 1,385 530 220 126 208 301

Others . 9.4 1,660 630 263 152 250 365

i Totals . 33.6 5,815 2,560 843 438 788 1,186

In the above I arbitrarily pre-supposed that the following adjustments
In disbursements of incomes would have taken place:

Table XXI

DISBURSEMENTS OF INCOME
(Percentages)

Home Other

Income Food Furnishings Clothing Commodities Balance

1940 1960 1940 1960 1940 1960 1940 1960 1940 1960 1940 1960

Agriculture .

100

12.2

4.7

5.8

19.1

18.8

fiocondary industry

100

39.5

15.8

7.5

9.1

13.4

24.6

fMhers .

100

15.8

9.1

13.4

26.7

In this very modest tempo of development, we obtain figures from
which possible imports can be calculated. It may be figured that 750 to
1.000 million guilders' worth of articles could be imported per year, assum¬
ing that the Indies would limit itself exclusively to the manufacture of
m tides for domestic use. In addition, since the Indies would to a large
extent have to import the capital necessary for the expansion of production
•ad consumption, not less than an estimated 1,500 million guilders would
l"ive to be invested, of which between 700 and 1,000 million guilders would
go for the importation of machinery.

Such an investment would certainly prove profitable if foreign couii
lilos would be willing to pay reasonable prices for Indonesian raw

materials and products. The internal situation would then become rein
tively prosperous, and much more could be done for public health, defenrt
and education than formerly. Not 40%, but 100% of the youth would thml
be educated; hundreds of millions of guilders yearly would be availal.l.

for defense. M

This hypothetical setup of the future is by no means Utopian. Shoul.l
anyone in the U. S. in 1870 have predicted the situation attained thero IH
1900, it would probably have sounded quite as fantastic. The Netherlandi
Indies have become ready during the last ten years for development IH
an even faster tempo than the one which I illustrated as a possibility. EvMJ

year during these years new agricultural centers were being opo.I

in the Outer Islands; modem industry was developing much faster them I
thought possible, thanks to directed economy and to the absence of com¬
mercial imperialism. With much trouble and difficulty, a life of its own,

young and strong, has developed in the Indonesian world. In a short ..

this Indonesian life has taken over various functions, some of them in |m.
duction. Already 50% of the rubber, 70% of the tapioca, 50% of the colln*,
and many other export products are handled not by the European estciM
but by the Indonesian farmer.

In secondary industry about 25% of the managing positions in ll.*
factories are already occupied by Indonesians. The overseer groups "•'*
consist of about 75% Indonesians. More and more the European unmigi.ittl
is seeing his place taken by the intellectual Indonesian. Thus the basi« ll
laid for many possibilities which did not formerly exist. The European will
be spurred to greater effort, to greater science and to greater enterpn-

If he is incapable of greater effort, then his services as leader boc'.ml
superfluous. Developments have shown that he is fully aware of thin •■l-l*
gation. Until as recently as 1930 no ships could be built in the Indies lunjai
than 500 to 600 tons; in 1940 docks and ways were built for ships of HMNM
tons. In 1930 the largest piece of steel which could be cast in the Indio* wrt|
of 1,500 kilograms; in 1940 pieces of 7,500 kilograms could be produced, tl
this whole development, the experience, science and organizing tal. i -
the Western entrepreneur continually stimulated more difficult lyi'""
production. After a stabilization of technique has taken place, the Indoim-llHI
more and more rapidly takes over all or part of this production. In Ih*
manner, through this cooperation between East and West, the wealth ol
Indies was acquired in the past. Thus Dutch entrepreneurs earned a H-*

in Indonesian economic life. M

In the future there will be the same white man's job to be done, ll l» Ih|

oxample, almost certain that natural rubber will be largely replaced by the
nynthetic product in industrial countries. A tin substitute is being sought,
us well as a palm oil substitute for use in the tin plate industry.

The war has caused the cultivation in South and Central America of
many Netherlands Indies plants producing raw materials. Through all these
rhanges, many of the present exports from the Indies will disappear. This
will undoubtedly be a heavy blow for prosperity, but the Dutch entrepreneur
mid the Indonesian population have dealt with similar situations before. The
nynthetic dyestuff industry killed the flourishing indigo production. Synthe¬
tic resins drove 70% of Indies' natural gums from the world markets. The
Increase in sugar production elsewhere made it necessary to stop 50% of
lava's very efficient sugar industry.

All these blows have been sustained. At the same time the Dutch started
mbber production, palm oil production and sisal production, which through
• ooperation with the Indonesian population, expanded to new and impor¬
tant sources of income. The dangers mentioned here can be overcome in
name similar way; they will be overcome: the Indonesian people, cooperat¬
ing with and stimulated by Western experience and science will undoubted¬
ly rapidly regain their place in the world when the land shall again be
lice. Industrial development will play an important role in this.

In this study I have endeavored to give an idea of the industrial situa¬
tion, as it has developed in the Netherlands Indies thus far. Before outlining
ilie main points of the program for the extensive policy which should be
(• flowed, we must consider many attempts to industrialization made since
Ihe first part of this century.

About 1901, it was stressed in the Netherlands Parliament that prosperity
in the Indies could only be increased if a secondary industry could be
•Inveloped. This theory was accepted, and technical experts started their
•Indies. Many of them submitted reports, which appeared to be widely
•livergent regarding the potentialities and the policy to be followed. How-
•wer, there was one unanimous opinion, i.e. that small-scale industry in
which the Indonesian could do good work, could offer no competition
M'lainst the greater mechanized industry, where, in the opinion of many, the
Indonesian worker would not be at his best.

These confused theories resulted, after many arguments back and forth,
in Governoi General Idenburg's appointing a commission in 1916 to establish
I'M’tories, eallml Ibo Commission for Factory Industry. In the opening speech
Hiln statesman declared that while there was no unanimity of opinion as
Mnjards ih* 1 i •'••linos, it had been proved that Western organ r/od factor

ies could manufacture certain commodities more cheaply than they couli
be imported—therefore, let us see that these factories are established *i«
soon as possible. This was more or less the order received by the Com
mission from the Governor General.

The Commission set to work—it analyzed the manufacture of existimj
import articles, made suggestions, of which a few proved practicable, <m.l
was finally dissolved by Governor General D. Fock.

A paper factory established with Government aid, besides a railrc >< i«|
carriage factory which was closed down within a short time, and m<my
projects on paper, was the industrial result of the extensive work perform#!
by the factory commission. Nevertheless, a basis was laid for future dev«)«*p
ment.

Technical experts were brought in to study the projects; industrial mn
sultants were appointed to make surveys and to give instruction. A pion«wi
enterprise in the textile line was set up but failed; however, the technb
personnel which consequently became available formed the basis of till
Textile Institute at Bandoeng, which later proved so useful. From a simllflf
pioneer enterprise in the line of ceramics, the Ceramics Laboratory mini
into being. There were other such examples.

It is my personal conviction that in these years when there undoubt mil f
existed a strong and sincere desire to industrialize the Netherlands Indinn in
order to increase the prosperity of the Indonesians, comparatively I mu
was achieved only because all attempts were based on transplantlmj
Western organizing methods to an Indonesian society not prepared for llmfftf
Too little attention was paid to the basic social structure and the ecdftohm
conditions in the Netherlands Indies. The setting up of factories such cm ii>*
Commission had in mind, could only mean the establishment and mcfiuM.ll
ment of production by Westerners. In that manner the native popu]ull»»H
could not really participate in further development.

Meanwhile, new views were born, which all emphasized the poinl 1 U 1 I
activity on the part of the population itself, even if on a small sea In •!}
first, should be considered as more important than the establishment lonift#
of foreign enterprises. Means to this end were considered: expansion »
more expansion of elementary education; increase of production and coitfl
quently of the purchasing power of the individual farmer; a rice pnlti'4
absorption of farmers into small-scale industry which could be operated hi
and for the Indonesian; development of such small-scale industry by Inwrtf
freight and power rates, by extensive instruction and, where necessary ! y
support through financial grants and commercial policy.

Carrying through these general measures would, according to this view
which had also been adopted by the Government-develop the possibility
of important migrations of workers from primary to small-scale secondary
Industry. This development would bring possibilities for Indonesian leader-
nhip; this, in turn, would encourage the spontaneous establishment of larger
onterprises which, not being artificially created, would grow in a sound and
Btrong manner, while balanced relations could be maintained between local
production and local consumption, between export production and imports
Irom other countries.

The Government has strived resolutely during the past ten years to
realize the program briefly outlined above. The previous pages set forth as
objectively as possible all that has been achieved. The results obtained
demonstrate that the policy followed in these ten years has been efficacious.

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